[Company Exploration] Fine Circuit, 30 Years of PCB Specialization... Leap to Automotive Electronic MLB

CEO Yusugwon of Fine Circuit. / Photo by Fine Circuit

[Asia Economy Reporter Jang Hyowon] Fine Circuit, a rigid printed circuit board (RPCB) specialist, is entering the KOSDAQ through a SPAC (Special Purpose Acquisition Company) merger. Based on 30 years of accumulated PCB manufacturing expertise, Fine Circuit plans to expand into the automotive electronics multilayer PCB (MLB) business after listing.

Founded in 1991, Fine Circuit manufactures rigid PCBs primarily used in home appliances such as refrigerators, air conditioners, and washing machines. Although the rigid PCB industry saw many new entrants in the 2010s due to low-cost competition from Chinese companies, it has since stabilized into a small oligopoly market dominated by domestic production systems with excellent delivery responsiveness.

Fine Circuit's main products are double-sided PCBs and single-sided PCBs. As of the end of Q3 this year, double-sided PCBs accounted for 88.64% of sales, while single-sided PCBs made up 9.48%. In 2020, the domestic market size for single- and double-sided PCBs was approximately 650 billion KRW, with Fine Circuit holding an 8.8% market share.

Fine Circuit's major clients include global companies such as Samsung Electronics. Since registering as a first-tier supplier to Samsung Electronics in 2011, sales have steadily increased, surpassing 50 billion KRW in 2017 and targeting 70 billion KRW this year. The sales growth rate over the past three years has been around 12.3%.

The operating profit margin reached 9.9% through Q3 this year. Although the margin fluctuates slightly depending on the price of copper plates, the raw material for PCBs, it generally maintains around 10%, which is significantly higher than competitors. Last year, two competitors recorded operating profit margins of 4.2% and -0.7%, respectively.

The reason for this high profitability is Fine Circuit's 30 years of accumulated production and cost management know-how. Fine Circuit has internalized all 12 stages of the process from design to shipment, enabling one-step product manufacturing. Additionally, by strengthening quality management through the introduction of inspection equipment, it has minimized defect rates and reduced claim costs. In fact, the proportion of customer claims relative to sales decreased from 0.26% in 2020 to 0.08% as of last October.

CEO Yoo Soo-kwon of Fine Circuit said, “Because the company has a long history, we have been able to operate production processes systematically and accumulate know-how in management, which has allowed us to maintain low costs. Currently, we have a cost advantage even when competing with Chinese companies.”

Fine Circuit's PCB product sales are expected to grow alongside the expanding premium home appliance market. For example, Samsung Electronics' Consumer Electronics (CE) division sales increased from 45 trillion KRW in 2019 to 56 trillion KRW in 2021. The premium ‘Bespoke’ series refrigerators, launched in 2019, sold over 2 million units worldwide, contributing significantly. With the increasing frequency of high-spec new product launches, PCB demand is also expected to rise.

Fine Circuit plans to use its existing double- and single-sided PCB business as a cash cow while actively entering the multilayer PCB (MLB) market. MLBs are PCBs formed by stacking multiple layers of substrates to create wiring. They are classified by the number of layers into low-layer (up to 12 layers), mid-layer (12 to 18 layers), high-layer (18 to 24 layers), and ultra-high-layer (more than 24 layers). Generally, low-layer MLBs with up to 12 layers are used in computer and laptop motherboards and automotive electronics.

Fine Circuit aims to target the premium home appliance and automotive electronics markets with MLB products of up to 8 layers. To this end, it completed its second factory in October, equipped with automated facilities for double-sided PCBs and MLBs. Currently, Fine Circuit's production capacity is 360,000 sheets annually for double-sided PCBs and 600,000 sheets for single-sided PCBs. With the second factory's equipment, an additional 300,000 sheets can be produced, expanding production capacity by about 40 billion KRW. The second factory is scheduled for pilot production in December this year and full operation starting January 2023.

Additionally, Fine Circuit is considering mergers and acquisitions (M&A) of automotive electronics MLB companies after listing. The plan is to acquire companies that have obtained SQ certification from automakers and have MLB production systems in place.

CEO Yoo said, “By acquiring SQ-certified companies, we plan to shorten the time and procedures required to obtain certification and build a track record of MLB supply to timely meet increasing demand. We are currently reviewing 2 to 3 companies, and if successful, automotive electronics-related sales are expected to reach around 40 billion KRW by 2025.”

Meanwhile, Fine Circuit is preparing to merge with Shin Young SPAC No.6. The merger ratio is 1 to 0.3173595. After listing, the shares held by major shareholders including CEO Yoo Soo-kwon will be 87.98%, most of which will be locked up for 2 years and 6 months. Following the extraordinary general meeting on the 29th, the stock purchase request period will run until January 19, 2023, with the merger scheduled for February 1. The expected date for stock listing is February 17, 2023.