A 20-nanometer based 64 gigabit (Gb) NAND flash chip developed by Hynix Semiconductor / Korea Times

By Kim Yoo-chul
Staff Reporter

ICHEON, Gyeonggi Province - The executives of Hynix Semiconductor, the world's second-largest memory chipmaker behind domestic rival Samsung Electronics, would do anything they could to attract a new owner for the company.

They could only hope that the strengthening chip market, which is predicting record profit for the troubled chipmaker, would make Hynix look more attractive to potential suitors.

It remains to be seen whether the strengthening demand for memory chips, driven by an increasing demand for consumer electronics products, would be enough to significantly improve Hynix's financial conditions and motivate potential buyers to go for the splurge.

"Potential Hynix buyers have in the past cited uncertainty in the outlook of the global memory chip market, but it is a totally different situation now. Overall, the market is expected to continue its upswing mood over the next two or three years," according to an official at one of Hynix’s creditors.

The official, who asked not to be named, predicted that the stalled stake sale process of the company could be heading for a breakthrough, as early as during the second-half of the year, after eight Hynix creditors lowered their combined stake to below 16 percent.

The banks still have to find a buyer for their remaining stake of 21 percent, although they are planning to unload 5 percent more a few months later.

"We love the prospects for the stale of the remaining stake after the banks recently raised $813.5 million by putting 6.67 percent of the stake in a block-sale without discount," he said.

The creditors, which include the Korea Exchange Bank (KEB), failed to attract anybody in their auction to sell their $3.1 billion controlling stake, even though the deadline was extended.

Kwon Oh-chul, who succeeds Kim Jong-kap as the new Hynix chief executive, has pledged to improve the financial soundless of the chipmaker by lowering the debt by 3 trillion won (about $2.6 billion) over the next three years.

For this year alone, Hynix is planning to lower its total debt to 6 trillion won from the current 7 trillion won. Kwon is also planning to boost the company's internal cash holdings to 1.5 trillion won by the year's end.

"I will commit to make Hynix a financially sound company that posts steady earnings regardless of market cycles. We need to post at least 4 trillion won in average annual earnings before interest, taxes, depreciation and amortization (EBITDA) to make another timely investment," Kwon told reporters in a recent news conference.

To catch the "two rabbits," or fining a new buyer and achieving financial soundless, Kwon said he will return the company’s focus to its two main markets ― DRAMs and NAND flash memory chips.

The company had dabbled with new experiments over the years, including its attempt to develop system chips, but failed to yield visible results.

"We will solidify our leadership as the top memory chip maker," Kwon said. The company expects to produce DRAM and NAND flash chips based on the company’s state-of-the-art 30-nanometer and 20-nanometer technologies.

The semiconductor chips of today have millions of minuscule electronic circuits, which are etched into a silicon disk on a nanometer (one billionth of a meter) scale.

A smaller measurement means that the chip circuit consists of thinner electric lines, thereby housing more circuits and storage in the same amount of space.

Such as technological advantage allows the company larger room to lower production costs. Hynix and Samsung Electronics are successfully applying such thinner technologies in chip production, while their Japanese and Taiwanese rivals are lagging in this area.

"Hynix's renewed commitment to memory is reasonable considering the market's momentum. Kwon seems intent to attract a potential buyer with improved cash holdings, lower debt and technology advancements," said Lee Ka-keun, an analyst at IBK Securities.

"This is why creditors are opting to sell some of their stakes in block sales. Once the industry plunges into another downturn in a couple of years, then it will become even harder to find a new owner," Lee said.

Gartner, a market research firm, expects the global semiconductor industry to grow by nearly 20 percent year-on-year this year from the $228.4 billion in 2009.

Candidates for Ownership

Despite repeated denials even by the LG Group Chairman Koo Bon-moo, chances are still opened that the conglomerate will join the acquisition talks with the creditors, industry watchers day.

In a congratulatory message to Kwon, LG Electronics chief executive Nam Yong said the consumer electronics company will build a new strategic partnership with the chipmaker, although an LG Electronics spokesman declined comment on whether Hynix is on the group's shopping list.

In Kwon's opinion, LG is more than qualified as the new Hynix owner. In 1999, Hyundai Electronics, which preceded Hynix, absorbed LG's semiconductor unit, LG Semiconductor, and it remains to be seen whether history reverses.

"LG Electronics is one of the world's leading electronics companies. But Hynix as well as the creditors shod respect LG's final decision," Kwon said.

LG Electronics is the world's second-biggest maker of flat-screen televisions after Samsung Electroncis, while it is the world’s No. 3 mobile phone maker. LG has been on the phase to search its next-growth engines such as solar-cells.

"In a mid- and long-term strategy, LG Electronics will effectively nurture its solar cell-related businesses. If it buys some parts of Hynix’s stakes, then it will secure a stable supplement channel for wafers, a key component to run solar-powered products inferred from memory chip lines," an unnamed official said.