Chapter 31. Chairman of Yuseong Group (1)

In fact, no one knows the semiconductor market outlook for the next 10 years as well as I do.

Instead of answering directly, I asked, "Don't the many experts within the group and the researchers at Yuseong Economic Research Institute have opinions?"

Yuseong Economic Research Institute is the largest economic research institute in the country, issuing various reports on the Korean economy and industry. I read them to the point of being sick of them while working at a securities firm.

Chairman Yoo Jae-ho smiled at my words.

"Internal and external perspectives are different. The most dangerous moment in business is when everyone speaks with one voice."

He's right.

As a CEO, one needs to hear various voices.

When a high-ranking person tells you to speak your mind without holding back, you need to be careful. If you really speak your mind without holding back, you might end up being ostracized.

However, since I am an outsider, I decided to really speak my mind.

"Yuseong Electronics is the world's strongest in the memory sector. However, memory semiconductors account for only 30% of the entire semiconductor market. System semiconductors have the advantage of high profitability and stable demand. Therefore, I think we should actively enter this market."

The semiconductor industry can be broadly divided into two categories.

One is memory, and the other is non-memory. In fact, everything except DRAM and NAND is a non-memory semiconductor.

Central processing units (CPUs) and graphics cards (GPUs) used in computers and servers, camera image sensors (CIS) used in smartphones and autonomous vehicles, and so on.

Chairman Yoo Jae-ho nodded.

"That part is already underway with foundry investments."

To grow the semiconductor industry, not only technology but also trillions of dollars in capital are required.

Fortunately, Yuseong Electronics has substantial revenue from memory semiconductors and smartphones.

Based on this, Yuseong Electronics has declared that it will invest 100 trillion won in the development of system semiconductors over the next decade.

The ongoing investment has likely been decided after a thorough demand forecast by experts. The investment amount alone is a staggering 40 trillion won.

How many companies in the world have the technology and capital to make such a large-scale investment?

It's only possible for a company like Yuseong Electronics.

I said bluntly, "It needs to be doubled from the current level."

At my words, Sung Yuna looked surprised, and Chairman Yoo Jae-ho showed interest.

He asked with a slight smile, "Why do you think so?"

"Because everything will be digitized in the future."

This is something most experts predict.

The issue is the speed. The speed of digitization is much faster than everyone's expectations.

Talks of a semiconductor supercycle have been around for the past three years, but it's only the beginning. In a few years, the market will go crazy.

In fact, semiconductors will be required in all products that run on electricity, and a shortage of semiconductors will occur.

Automobile factories will stop due to a lack of semiconductors, and game consoles will not be produced.

"In a situation where it's uncertain how many customers can be secured, it's unrealistic to blindly increase equipment investment. Moreover, there are already strong companies in the foundry market."

The semiconductor industry can be broadly divided into three types.

Companies that only design, companies that only manufacture, and companies that both design and manufacture.

These are called fabless, foundry, and integrated device manufacturer (IDM), respectively.

Yuseong Electronics, which handles both design and manufacturing, falls under IDM.

The company Chairman Yoo Jae-ho mentioned is Taiwan's PSMC.

The world's largest foundry company with the highest technology. If Yuseong Electronics enters the foundry market, it will inevitably face off against PSMC.

Especially in the 10nm and below fine process, a duopoly between PSMC and Yuseong Electronics is formed. Even in a duopoly, PSMC has a 70% to 30% advantage.

"Yuseong Electronics has a fatal weakness in directly competing with PSMC."

Of course, it's a known fact, but Chairman Yoo Jae-ho asked as if he didn't know.

"What kind of weakness?"

"PSMC's motto is 'not to compete with customers.' But Yuseong Electronics is not like that."

The biggest concern for companies that outsource production is the leakage of their design or technology.

Therefore, PSMC declared that it does not do its own design, which led to customer trust. Mega fabless companies like Nfl, Qualcomm, and Nvidia willingly entrusted production to PSMC.

However, Yuseong Electronics is an IDM.

While there are various mechanisms to protect designs, there is no guarantee that the know-how gained during the production process will not be applied to Yuseong Electronics' own designs.

From the customer's perspective, it's inevitable to feel uneasy. Especially for companies in competition with Yuseong Electronics.

Chairman Yoo Jae-ho smiled bitterly.

"Can't we give up our own design?"

I nodded.

"I think we need to turn our weakness into a strength."

"How so?"

"By providing or improving designs according to the needs of customers. Yuseong Electronics has considerable expertise in design."

Memory semiconductors are standard components commonly used in electronic devices. In contrast, non-memory semiconductors have different designs depending on where they are used, such as in PCs, laptops, smartphones, and vehicles.

Therefore, while memory semiconductors are mass-produced in small varieties, system semiconductors are produced in small quantities of many varieties.

The weakness of handling both production and design can be turned into a strength by providing or improving designs.

Chairman Yoo Jae-ho nodded with a smile.

"Ah, a change in perspective, I see."

Although he said it that way, he didn't seem particularly surprised.

After all, what I said is already underway. How many smart people are there in Yuseong Electronics?

In fact, not only Yuseong Electronics but also Antel, which later entered the foundry competition, adopted the same approach.

"To do that, we need to further enhance our design capabilities."

"Do you mean to increase investment in design?"

In the manufacturing sector, generally, the more money you spend, the more results you get. However, this is not always the case in the design sector. There are plenty of cases where you spend money and fail.

The best way to solve this problem is...

"We need to actively acquire fabless companies."

Chairman Yoo Jae-ho shook his head.

"There are too many bad companies, and good companies are already highly valued in the market."

The term 'fabless' may sound grand, but in reality, fabless companies are abundant in the market.

In the semiconductor industry, one genius can do the work of 10,000 people.

Without a factory, capital is not a major requirement, and there are companies that provide the underlying design, so fabless companies have sprung up like mushrooms.

However, how many of these companies actually make a profit?

On the other hand, those that do make a profit have already achieved enormous valuations.

"Moreover, such companies cannot be bought just with money."

Semiconductors are a national key industry.

It is directly related to security and monopoly issues, so approval from the relevant country and related countries is required.

In fact, deals often fall through at the last minute due to such issues.

"There are many good startups. Small companies with a few employees can grow significantly. We need to select and acquire good companies among them."

In this case, there is no need for special approval.

Chairman Yoo Jae-ho said jokingly, "I guess I lack that ability."

Sung Yuna waved her hands in surprise.

"No, no, Chairman. What are you saying?"

In fact, it's true.

If he had done well, Yuseong Electronics wouldn't have been held back in the future.

"Even if we want to increase investment in foundries, there are many practical constraints. Building a semiconductor factory is not that simple."

I nodded.

"We need the equipment and personnel to go into it."

"Especially, the production of EUV equipment is limited. Even if we build a factory, it will be useless without EUV equipment."

The prices of the equipment inside a semiconductor factory are beyond imagination. The most expensive equipment is the EUV equipment used in the exposure process.

The price is simply beyond imagination.

The latest equipment is known to cost over $150 million per unit.

The reason it is so expensive is not only because it is difficult to manufacture but also because there is only one company in the world that produces this equipment.

Namely, ASML in the Netherlands.

A bigger problem than the price is the limited production. Due to the difficulty of manufacturing, it is hard to meet the demand on time.

Yuseong Electronics, being a super-major in the semiconductor field, has no reason to complain. However, ASML is an exception.

In fact, a few years later, Yuseong Electronics will face a situation where it cannot operate its factory due to the lack of EUV equipment, even after completing the construction.

Eventually, there will be a competition to acquire the equipment, with companies even offering premiums.

Now it's time to bring up the main topic.

"We need to find alternative technologies to EUV."

"How so?"

"The most reliable way is to acquire companies with related technologies."

"Are there such companies?"

It seemed that Sung Yuna finally realized what I was trying to say and looked at me with a surprised expression.

I said without hesitation, "Yes, there are."

Chairman Yoo Jae-ho showed interest.

"Which company?"

"Dongwoo Precision."

"A company that was recently suspended from trading, I see."

Dongwoo Precision is a relatively large company among semiconductor component manufacturers. He must know about it.

"Do you have any connection with that company?"

There was no need to lie, so I spoke honestly.

"Actually, my friend and I bought the company's bonds."

Chairman Yoo Jae-ho burst into laughter, finding it amusing.

"Ha ha ha! So you're asking me to pay your debt for you?"

Although he said it jokingly, there was a hidden meaning. One wrong word here, and I might be kicked out.

But I didn't beat around the bush.

"Yes."

"Mi-ru!"

Sung Yuna exclaimed in surprise, and Chairman Yoo Jae-ho asked, "Why should I do that?"

I gave him the reason in one sentence.

"500 billion dollars."

"Pardon?"

"The technology that Dongwoo Precision possesses is worth more than 500 billion dollars. Therefore, Yuseong Electronics should acquire it before other companies do."

Although it's only known to me now, the acquisition of Dongwoo Precision by XRT Semicon will later be called a disaster for the Korean semiconductor industry.

The reason is that behind XRT Semicon is CMIC, the largest semiconductor foundry company in China.