[This Week's Gwan.Jong] Go Young Expands Territory with HBM Testing Equipment

World's First 3D Inspection Equipment Development
1st in Market Share for 3D SPI and 3D AOI

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There is a company leading the 3D Surface Mount Technology (SMT) inspection equipment market. It is KOSDAQ-listed 'Koh Young Technology (Koh Young).' It is a strong small-to-medium enterprise that has maintained the number one market share since 2013 in its flagship products: solder paste inspection (SPI) and automated optical inspection (AOI) for component placement. After a sluggish performance throughout last month, its stock price surged 37.7% from 11,110 KRW to 15,300 KRW between December 1 and December 18. This rise is due to Koh Young expanding its inspection domain with on-device artificial intelligence (AI) and high-bandwidth memory (HBM). Although it showed poor performance and stock price due to the US-China semiconductor war, it is being re-evaluated after successfully supplying initial inspection equipment for wafer-level package (WLP) advanced packaging in the fourth quarter of this year.

The world's first developer of 3D inspection equipment... Number one in global market share

Koh Young was established in April 2002 as a 3D inspection equipment company. It manufactures robots that detect defects occurring during the printed circuit board (PCB) assembly process by measuring them in three dimensions. There is demand from various front industries such as automotive electronics, semiconductors, and mobile devices. Koh Young's business segments are broadly divided into ▲3D AOI ▲3D SPI ▲Others (Meister, Neptune, KY P-3, and components). The sales proportions are 48.3% from the 3D AOI segment and 42.2% from the 3D SPI segment.

3D AOI is equipment that inspects whether other components are properly placed on top of soldering, and Koh Young plans to expand its market share to 50% through continuous research and development. 3D SPI inspects defects in soldering on the PCB surface. With the enforcement of product liability laws, systematic automated inspection for quality assurance has become essential, leading to steadily increasing inspection demand in various front industries such as automotive and secondary batteries. In particular, automotive-related industries must inspect safety-related products such as ECU, airbags, and ABS control units. Koh Young has maintained the world's number one market share since 2006.

The reason Koh Young was recognized over Japanese and German companies is its technological prowess. Before Koh Young, 2D inspection equipment was dominant. While 2D AOI equipment performed the minimum function of defect detection, it had many false defects and defect escapes. Amid this, Koh Young developed the world's first 3D inspection equipment, changing the framework of inspection equipment to 3D. After successfully supplying to Germany's Siemens, global companies began to seek Koh Young.

US-China semiconductor war triggers 'reshoring' trend... Impact on performance

There were times of crisis. Six years after its founding by CEO Koh Kwang-il, the global financial crisis occurred in 2008. As a result, sales plummeted, and performance faltered in 2009. While all companies were undergoing restructuring, CEO Koh expanded investments instead, judging that the global economic crisis would not last long. His judgment was correct. When the global economy recovered in 2010, Koh Young's sales surged 2.5 times. It then dominated the inspection equipment market, surpassing German and Japanese companies that had previously led with their technology.

Although Koh Young steadily expanded sales, it recorded weaker-than-expected performance in the first half of this year. Sales for the first half of this year were 52.97787 billion KRW, operating profit and net profit were 3.08632 billion KRW and 3.86603 billion KRW, respectively. Compared to the same period last year?sales of 133.5 billion KRW, operating profit of 21.09482 billion KRW, and net profit of 24.92112 billion KRW?these represent declines of 60.1%, 85.3%, and 84.4%, respectively.

The semiconductor DRAM inventory problem that has continued since the end of last year affected performance. As both memory and non-memory markets contracted in the first half of this year, demand for inspection equipment also decreased. Additionally, US trade sanctions against China negatively impacted performance. With industrial equipment investment in China entering a recession, Koh Young's sales also declined.

Fortunately, performance is expected to rebound as the semiconductor industry recovers. When semiconductor companies in front industries invest in new lines or expand existing ones, demand for inspection equipment also increases. Although demand in China has decreased, increased demand in the US and Europe is a positive sign. Furthermore, the continuous growth of inspection equipment demand in general industrial sectors beyond semiconductors is also encouraging.

Additionally, Koh Young is defending its core business downturn with medical robots (Kaimeiro). Koh Young also produces medical robots for brain surgery. Medical robots are just beginning to be introduced in neurosurgery such as brain and spinal surgeries. The global market size for neurosurgical robots is expected to grow from about 2 trillion KRW in 2021 to about 5 trillion KRW by 2028. The company is also preparing again for the US FDA certification process. It is expected to expand sales channels overseas.

Expected to transform into semiconductor inspection equipment with on-device AI, HBM, etc.

The reason the market is paying attention to Koh Young again is that it is expanding its business area into system semiconductor components. Koh Young introduced the 'Meister W' series, a wafer-level packaging (WLP) process inspection solution, into the mass production lines of global semiconductor customers in the fourth quarter of this year. WLP refers to a method that, unlike the traditional process of cutting chips one by one after wafer processing and then packaging, performs packaging and testing processes all at once while the wafer is intact, then cuts the chips to produce finished products simply.

The WLP method can reduce manufacturing costs. Above all, it offers advantages such as thickness reduction, productivity improvement, and enhanced heat dissipation. Accordingly, as WLP semiconductor packaging technology gains prominence, various new inspection demands are being created.

On-device AI refers to AI that operates independently on personal devices such as smartphones and autonomous vehicles. Recently, global semiconductor companies have been releasing semiconductors that support on-device AI services. Starting next year, on-device AI is expected to become standard in markets such as mobile, leading to significant market expansion.

Global semiconductor companies are expanding HBM supply by establishing advanced packaging lines as the AI market grows. Lee Sang-heon, a researcher at Hi Investment & Securities, analyzed, "As inspection demand for various targets such as HBM increases in future semiconductor advanced packaging processes, Koh Young is expected to benefit. The company will soon transform into a semiconductor inspection equipment provider, accelerating its growth potential."