Vietnam Factory to Fully Operate in Second Half
Factory Utilization Rate Rises... "Considering Additional Investment"
As the number of confirmed cases of the novel coronavirus infection (COVID-19) worldwide surpassed 3 million, society is rapidly transitioning to a contactless (untact) environment. With the spread of untact culture, internet data traffic has surged, and demand for server DRAM has also increased. This is why semiconductor-related companies are expected to see improved performance despite widespread concerns about a global economic downturn. The semiconductor industry, a representative export item of Korea, is one of the key indicators to gauge the domestic economic recovery. We take a closer look at materials, components, and equipment companies within the semiconductor value chain that are showing signs of performance improvement.
[Asan, Chungnam = Reporter Yoo Hyun-seok] "Due to increased online activities caused by COVID-19, demand for solid-state drives (SSD) is rising. Some customers are even requesting us to increase production."
On the 24th, Lee Sang-guk, CEO of KMH Hi-Tech, whom we met at the company’s headquarters in Asan, Chungcheongnam-do, was full of confidence. KMH Hi-Tech mainly produces parts and materials used in semiconductor processes. Its main products include IC trays, module trays, carrier tapes, and SSD cases. These products serve to protect against external shocks and static electricity.
At the IC tray production line, the first place we visited at KMH Hi-Tech headquarters, products were continuously being produced. IC trays are made by combining raw materials such as resin with anti-static materials. A company official explained, "The operating rate of IC trays was around 60% last year, but recently it has risen to 80%. Internally, we are considering additional investments."
After passing the busy IC tray line, we went to the SSD case production facility. SSD cases are products completed through complex processes such as heat treatment, sanding, electrodeposition, CNC, printing, and cleaning. According to a company official, this is the area where KMH Hi-Tech expects growth this year and is currently operating at full capacity. The official said, "Except for a small part of the manufacturing process, everything has been automated. In the past, some parts were outsourced, but now internalization has improved efficiency and productivity."
After inspecting the main production lines, we had a conversation with CEO Lee in the conference room. He said that since taking office, he has emphasized quality the most. Through this, operating profit, which was about 1 billion KRW from 2015 to 2017, reached 4.1 billion KRW in 2018 and 5.2 billion KRW in 2019. CEO Lee said, "What I emphasized after coming here was strengthening customer-oriented quality, which was the first mission. Every morning, we emphasize and check quality; quality is fundamental."
KMH Hi-Tech expects that while the past period was a stabilization phase, this year could be the beginning of full-scale growth. The newly established Vietnam factory, which is being invested in with nearly 8 billion KRW, is expected to start production in the second half of the year. CEO Lee emphasized, "In Vietnam, labor costs are more advantageous compared to Korea. As costs improve, it will help in terms of operating profit."
Contrary to concerns about the semiconductor industry due to COVID-19, demand for server and SSD products is high, so sales targets are set high. Some customers have requested increased production. CEO Lee said, "Having solidified our foundation so far, now we will focus on expanding our scale. Our goal is to build a company with 100 billion KRW in sales."
Activities to enhance shareholder value will also be strengthened. On the 27th, the company’s four executives, including CEO Lee, purchased about 60,000 shares of treasury stock. CEO Lee explained, "Through improving company performance, we plan to pay dividends in the future. This will demonstrate responsible management."
Going forward, the company plans to continuously grow existing businesses by expanding its customer base and add new businesses to increase sales. He emphasized, "KMH Hi-Tech has technology for die casting and pressing through its SSD case business, and we are considering a new business in the automotive battery sector using this technology. Our goal is to achieve both scale and substance through new items and customer expansion."
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