DB HiTek, Once Overlooked Due to Fire-Sale Prices, Transforms into a Valuable Affiliate

DB HiTek's 1Q Order Backlog Surpasses 100,000 Units
Backlog Higher Than During Supercycle
Full Factory Operation Amid 8-Inch Semiconductor Shortage
Record 1Q Quarterly Sales Followed by Expected Annual Sales of 1 Trillion Won

[Asia Economy Reporter Su-yeon Woo] DB HiTek, Korea's first pure-play foundry company, has achieved record-breaking performance thanks to the boom in the 8-inch (200mm) semiconductor market. DB HiTek, once treated as an "ugly duckling" after failing to sell at a bargain price of 200 billion KRW during the Dongbu Group restructuring led by the Korea Development Bank in 2013, has steadily secured market dominance and completely transformed into a "swan" with a market capitalization exceeding 2 trillion KRW.

According to the industry on the 21st, DB HiTek's order backlog in the first quarter of this year surpassed 100,000 units, reaching 100,153 units. This figure is more than 30% higher than the 76,306 units in the first quarter of last year and is significantly higher than the previous semiconductor supercycle (2016?2018).

A large order backlog, which refers to orders not yet fulfilled, indicates a substantial volume of pending orders. The industry views that, coupled with the recent shortage of 8-inch semiconductors, DB HiTek has already received pre-orders through 2022. A DB HiTek representative stated, "This year, production is running at 100% full capacity, barely meeting customer demand," adding, "Strong customer demand is expected to continue for some time."

The former Dongbu Group established Dongbu Electronics, the predecessor of DB HiTek, in 1997 and entered the foundry business for the first time in Korea in 2000. At that time, the concept of foundry was unfamiliar, and there was no government support, so the company had to establish all necessary infrastructure such as electricity and water supply on its own. Due to the high initial investment costs, it took a full 14 years to turn an annual profit in 2014.

Although there was internal confidence in being the "world's number one analog semiconductor" in 2014, the actual sale was sluggish even at the bargain price of 200 billion KRW. Since the trend was mass production of a few products, DB HiTek, which focused on small-volume production of many varieties, was not an attractive option for large companies like Samsung and LG.

Ultimately, the sale fell through, but it became a blessing in disguise for the group. This year, as the automotive semiconductor supply crisis unfolded, the 8-inch analog semiconductor market began to receive attention. DB HiTek primarily uses the 8-inch process to manufacture power semiconductors, display driver ICs (DDI), image sensors, and other system semiconductors on a consignment basis. Although some automotive semiconductors are produced, their proportion is not large.

With the recent rise in 8-inch foundry production costs, DB HiTek achieved its highest quarterly sales ever in the first quarter of this year, with revenue of 243.7 billion KRW. It is expected to comfortably exceed 1 trillion KRW in annual sales this year. The industry anticipates that the shortage of 8-inch foundry supply in the non-memory sector will continue at least until 2022.

Choi Do-yeon, a researcher at Shinhan Financial Investment, said, "With the recent government announcement of the K-semiconductor strategy, DB HiTek will benefit from tax and financial incentives and regulatory improvements," adding, "An unprecedented non-memory supply shortage has created a favorable environment for full-scale growth."

This content was produced with the assistance of AI translation services.