System Semiconductors in High Demand...Mid-sized Companies Also Excited

Historic Boom in Non-Memory (System) Semiconductors Due to Surge in Orders
Semiconductor Industry Operating Factories at 100%, Considering Expansion

[Asia Economy Reporter Changhwan Lee] Recently, as the non-memory (system) semiconductor market has entered a super-booming phase, orders are pouring in not only to Samsung Electronics but also to mid-sized semiconductor companies such as DB HiTek and Silicon Works. The demand for semiconductors has increased due to the activation of non-face-to-face (untact) culture amid the COVID-19 pandemic, resulting in a continued supply shortage.

According to the semiconductor industry on the 18th, Samsung Electronics' foundry (semiconductor contract manufacturing) division is reportedly operating its factories at 100% capacity due to a surge in orders.

Samsung Electronics' foundry division manufactures various non-memory semiconductors such as mobile application processors (AP), graphics processing units (GPU), image sensors (CIS), and automotive semiconductors, receiving orders not only for its own volume but also from major clients like Qualcomm, Nvidia, and IBM. The increase in semiconductor demand is due to the rise in electronic device usage following the COVID-19 outbreak, coupled with improved foundry business conditions, leading to a significant increase in orders.

Samsung Electronics has embarked on expanding its foundry business through large-scale investments, but the pace of factory expansion is not keeping up with the growing demand. Industry insiders expect Samsung Electronics to announce additional investments at the investor relations (IR) meeting scheduled for the 28th.

The favorable business conditions extend to mid-sized companies as well. The factory utilization rate of DB HiTek, an analog semiconductor foundry company, also reaches 100%. DB HiTek produces products based on 8-inch (200mm) wafers. It is reported that the company has a backlog of orders ranging from six months to a year.

It is estimated that DB HiTek achieved a record-high operating profit of 260 billion KRW last year, with projections indicating an increase to over 300 billion KRW this year. Due to rising demand, factory expansion and price hikes are also expected. Do-yeon Choi, a researcher at Shinhan Financial Investment, analyzed, "Recently, overseas 8-inch foundry companies such as UMC and Vanguard have started raising prices," adding, "This is the optimal time for DB HiTek to propose price increases."

The fabless industry, which focuses on semiconductor design, is also experiencing a boom. Silicon Works, affiliated with LG, is a representative example. Silicon Works, which mainly produces DDIs, has seen significant performance improvements recently due to increased sales of TVs and other home appliances. It is estimated to have earned about 100 billion KRW in operating profit last year.

This year, with expected increases in sales of TVs and smartphones, the display industry is anticipated to perform better than last year, with profits projected to surge by nearly 50% compared to the previous year.

An industry official said, "Since the COVID-19 outbreak, orders have increased significantly, greatly improving the non-memory semiconductor business conditions," adding, "Most companies are operating their factories at 100% capacity and are even considering expansion."