High-tech parts suppliers to watch in 2021

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By Kim Bo-eun

Eyes are on local SMEs manufacturing high-tech materials, components and equipment amid expectations of a super cycle for semiconductors this year and scaled-up government support.

The semiconductor equipment market is expected to grow to $71.9 billion in 2021, up 4.3 percent from $68.9 billion in 2020. The market is forecast to grow to 76.1 billion in 2022.

The government has been focusing on fostering local high-tech suppliers, after Japan imposed trade restrictions on key materials for semiconductors and displays in July 2019. Korea had relied heavily on Japanese vendors up until then.

What began as efforts to secure materials, parts and equipment locally to prevent supply chain disruptions has grown into a strategy to foster globally competitive suppliers.

The government has pledged to invest 2.5 trillion won in R&D and infrastructure as well as financing for the industry this year. This is up 23 percent from investments for 2020.

Backed by government support and a surge in demand for semiconductors, displays and batteries this year, small-but-strong suppliers are set to see solid growth.

Dongjin Semichem

Dongjin Semichem Chairman Lee Boo-sup

Dongjin Semichem came under the spotlight for its success in developing photoresist, which is used in semiconductor manufacturing. Chip makers have been largely dependent on Japanese suppliers for the material. Dongjin is the only local firm that is able to produce the material.

The company saw a jump in earnings as it expanded supply to major conglomerates such as Samsung last year.

The company began expanding photoresist production facilities last year. The new facilities will be completed by the end of this month, going into production in April.

"We expect to be able to double production with the expanded facilities," a Dongjin Semichem official said. "This is set to bring up earnings from photoresist by up to 30 percent this year."

Nepes

Nepes Chairman Lee Byung-koo

Also among promising players is Nepes, a leading outsourced semiconductor assembly and test (OSAT) firm.

OSATs offer third-party packaging and test services for semiconductor firms. They package silicon devices that are made by foundries and test devices prior to shipping them to the market. Their role comes in the end stage of semiconductor manufacturing process after the wafer fabrication and wafer probe stages.

Nepes' strength is that it offers various OSAT services. Nepes specializes in wafer-level packaging, which is the technology of packing an integrated circuit without slicing the wafer into individual circuits.

Nepes is focusing on panel-level packaging (PLP) and fan-out panel-level packaging (FOPLP). PLP shifts packaging from wafer format to large panels as a way to reduce costs. FOPLP moves fan-out package manufacturing from wafer to large-scale panel. Fan-out packaging has connections fanned out on the chip surface.

In March 2020, Nepes launched an affiliate specializing in FOPLP services. It aims to bring up the unit's sales to 400 billion won by 2024. Nepes Ark, which specializes in chip testing, was listed on Korea's secondary KOSDAQ bourse in November.

Nepes has been investing heavily in recent years to expand its packaging systems. Aside from semiconductor packaging, Nepes is also developing cutting-edge technologies, including neuromorphic chips, which are digitally processed analog chips with networks designed to mimic structures of the human brain.

"We expect better earnings throughout this year as demand for smartphones is showing signs of recovery," a Nepes official said. "Nepes is also set to see the longer-term effects of continued investment into new businesses."

Jusung Engineering

Jusung Engineering CEO Hwang Chul-joo

Another notable company is Jusung Engineering, which manufactures semiconductors, flat panel displays and solar cell production equipment. While the firm struggled in 2020 with reduced investments from local clients, it appears to be back on track for a performance boost this year.

Major semiconductor and display clients have resumed investments, and orders from Chinese clients have been restored in recent months.

Jusung signed a contract with LG Display to supply 17.5 billion won in display manufacturing equipment in November. It also made a display equipment supply deal with China's InfoVision Optoelectronics.

The company has continued R&D investments in next-generation equipment. It invested an accumulated 38.3 billion won, or 43.3 percent of the firm's sales, in the first three quarters of 2020.

Jusung is producing atomic layer deposition (ALD) equipment, which is used in manufacturing semiconductors and is set to be applied to display and solar cell manufacturing as well.

The company has secured 2,166 patents, which is the highest number in the local semiconductor equipment industry.

"We expect record earnings this year, given the scale of investments," Jusung Engineering CEO Hwang Chul-joo said.

"Jusung holds the greatest competitiveness in ALD, given we became the first to develop the technology."

EcoProBM

EcoProBM CEO Kim Byeong-hoon

Battery materials manufacturer EcoProBM is drawing attention after aggressive investments in production facilities in partnership with major battery makers.

EcoProBM is the top firm in the local cathode materials manufacturing market. In the global market, the company ranks second after Japan's Sumitomo Metal.

The company partnered with Samsung SDI in February last year to establish the joint venture EcoProEM. The new entity is constructing a cathode materials plant in Pohang at a cost of 180 billion won.

It aims to begin production by the first quarter of 2022. The plant will supply 30,000 tons of nickel, cobalt and aluminum (NCA) materials exclusively to Samsung SDI.

EcoProBM and Samsung SDI plan to boost investments to 400 billion won by 2025 to more than double annual production.

The company also set up a subsidiary in the U.S. to supply to SK Innovation's Georgia plant. The latter is set to supply nickel, cobalt and manganese (NCM) batteries to Ford and Volkswagen.

When the two plants under construction are completed, EcoProBM's annual production capacity will reach 180,000 tons, from the current level of 55,000 tons.

EcoProBM showed a handsome performance in the third quarter ― posting its highest sales to date at 250.2 billion won and an operating profit of 17.9 billion won. High nickel cathode material accounted for 98.2 billion won of sales, which is up 214 percent from the same period of 2019.

The spike in earnings is attributed to a surge in demand from EV carmakers as the market expands rapidly.

"EcoProBM is the only local supplier that produces both high-nickel NCA and NCM material," an EcoPro official said. EcoPro is the holding company of EcoProBM.

"Based on long-term supply contracts with clients, and the joint venture (with Samsung SDI), EcoProBM will be able to see stable growth in sales in the EV market in the medium to long term," she said.