Hynix Once Under Scrutiny, Now SK's 'Top Contributor'

SK Group Contributes 40% of Total Asset Growth
Started with 15 Trillion Debt at Launch
Faced Bankruptcy Crisis in 2 Years
Implemented Painful Self-Help Measures Including Restructuring and Wage Freeze
Overcame 'Chicken Game' to Secure Global DRAM 2nd Place

SK Hynix Gyeonggi Icheon M14 Plant

[Asia Economy Reporter Lim Juhyung] Behind SK Group's rise to the 2nd largest conglomerate by total assets, surpassing Hyundai Motor Group, lies SK Hynix. Benefiting from the memory semiconductor boom, Hynix has posted solid earnings, increasing its asset size by more than 20 trillion KRW last year alone. However, Hynix has not always had a smooth journey. It was launched burdened with astronomical debt and faced crises during two rounds of the so-called 'semiconductor chicken game.'

According to the list of 76 publicly disclosed business groups (with total assets exceeding 5 trillion KRW) announced by the Fair Trade Commission on the 27th, SK's total assets amounted to 291.969 trillion KRW, ranking 2nd in the business world after Samsung (483.919 trillion KRW). Hyundai Motor Group was pushed to 3rd place with total assets of 257.845 trillion KRW.

Hynix played a major role in pushing SK to 2nd place in the business world. Of SK's total asset increase of 52.439 trillion KRW last year, 40% (20.09 trillion KRW) came from Hynix.

With the global memory semiconductor boom continuing, Hynix is also posting strong results. In the first quarter of this year alone, Hynix recorded sales of 12.1557 trillion KRW and operating profit of 2.8596 trillion KRW. This performance surpassed the first quarter of 2018, a period of semiconductor super-boom. Its main product, DRAM, holds the world's 2nd largest market share after Samsung Electronics, and it is expanding its business by acquiring the NAND flash division from U.S. semiconductor company Intel.

Although now considered SK's flagship company, Hynix has not always sailed smoothly. From its first steps as a company to its incorporation under SK, Hynix's history has been one of continuous crises.

Hynix was established in 1999 through a 'big deal' where LG Group sold its semiconductor division to Hyundai Electronics. That year, Hyundai Electronics also changed its name to Hynix. However, at its launch, it was burdened with debt of 15.8 trillion KRW, and by 2001, compounded by a semiconductor downturn, it faced bankruptcy. Eventually, a creditors' consortium composed of multiple banks decided on joint management, and through a workout (corporate improvement process), the number of employees was drastically reduced from about 22,000 to 14,000, enduring significant hardship.

Hynix was also viewed as a negative factor affecting the domestic stock market. At the time, a securities firm report stated, "Sustaining Hynix's survival through external support rather than self-help efforts negatively impacts the entire DRAM industry and the domestic stock market." The argument was that if Hynix, which had already lost competitiveness, continued to exist, it would hinder restructuring of the domestic semiconductor industry.

Employees are working at the Hynix Icheon factory.

The creditors tried to sell Hynix and end joint management early, but the process was not easy. In 2009, Hyosung Group attempted to acquire Hynix but withdrew, and in the second sale announcement that year, no companies submitted letters of intent, causing the sale to fail. It was only in the third sale announcement in 2011 that SK (then SK Telecom) bid, finally completing the sale of Hynix.

Behind Hynix's revival was the united effort of its employees. In 2001, when the company was handed over to the creditors, the Hynix labor union issued a statement saying, "We entrust our pride and spirit as collateral and will repay with world-class quality." The number of executives was reduced by 30%, and wages were frozen for four years.

They succeeded in the 'Blue Chip Project,' a drastic measure to replace outdated semiconductor production lines with new ones, reducing costs while increasing productivity. All the money saved through these painful efforts was invested in research and development (R&D) and expansion of advanced equipment.

The two rounds of the 'semiconductor chicken game' from 2007 to 2011 also did not bring down Hynix. Due to the characteristics of the DRAM market, where prices fluctuate greatly depending on supply and demand, semiconductor companies engage in extreme price-cutting competition to increase market share, known as the chicken game. Over 20 DRAM manufacturers in 1995 gradually fell one by one through this chicken game. Despite fierce competition that led to the bankruptcy of major companies such as Germany's Qimonda (2009) and Japan's Elpida (2011), Hynix survived and eventually secured the 2nd place in the global DRAM market.

Now, Hynix is focusing not only on strengthening its fundamentals but also on expanding its scope. At the end of 2021, it incorporated Intel's NAND flash division, Solidigm, as a subsidiary, and is also considering acquiring the UK semiconductor design company 'ARM' by forming a consortium with other companies. In February, it succeeded in developing the next-generation memory semiconductor 'Processing-In-Memory (PIM),' accelerating efforts to discover new growth engines.

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