Spin-off rumors shake semiconductor industry... From Samsung to DB HiTek, 'commotion' continues

[Asia Economy Reporter Park Sun-mi] Following Samsung Electronics, DB HiTek is also facing increasing speculation about business spin-offs in the semiconductor industry. This reflects a growing recognition that, given the distinct strengths and weaknesses across each semiconductor process and the pronounced specialization trend in the Korean semiconductor sector, efforts to specialize through spin-offs are necessary to enhance global competitiveness.

According to the semiconductor industry on the 13th, DB HiTek has set a plan to separate its foundry business, which focuses on 8-inch wafer contract manufacturing, from its brand division that designs display driver ICs, aiming to expand each area independently from a long-term perspective.

In a response to an inquiry from the Financial Supervisory Service the day before, DB HiTek stated, "We are considering various strategies, including the spin-off of the foundry and design (fabless) businesses to strengthen specialization." Although the specific method and timing of the spin-off were not disclosed, the recent recruitment of former Samsung Electronics Executive Director Hwang Kyu-chul as the head (president) of DB HiTek's brand division and the personnel reshuffling confirm the direction toward separating the two business units.

The motivation behind DB HiTek’s intention to separate the foundry and fabless businesses lies in enhancing specialization. Although DB HiTek, whose main product is the 8-inch (200mm) foundry suited for small-volume, multi-product manufacturing, has been setting record-high performance annually, it faces challenges in increasing production volume in the short term due to the difficulty of expansion and the unsustainability of price increase cycles in the mid-to-long term.

This has led to assessments that growth is limited by the existing business alone. Moreover, the primary customers of the foundry are fabless companies. Fabless companies tend to be cautious about the fabless business within DB HiTek, as there is a risk that their core design assets could be leaked to competitors. For this reason, global foundry companies such as TSMC also separate their design businesses to protect their customers.

If DB HiTek spins off and grows its fabless business, which currently accounts for only about 20% of its total annual sales of 1.2 trillion won, it could move beyond its existing focus on designing display driver ICs (DDI) for liquid crystal displays (LCD). It would be able to expand into higher value-added chip design areas such as DDI for UHD TVs and OLEDs, mobile application processors (AP), and power management ICs (PMIC).

Currently, most of DB HiTek’s personnel are concentrated in the foundry business, with fabless employees accounting for less than 10% of the total workforce.

Samsung Electronics, which ranks first globally in memory semiconductors but lags behind TSMC in the foundry sector, is also advised to consider spin-offs as a solution. Samsung Securities recently reported that for Samsung Electronics to pursue an aggressive strategy in the foundry sector, it needs to secure more customers and increase its workforce.

They advised that spinning off the foundry division is a viable option. An industry insider said, "For Apple, TSMC’s main customer, it would be burdensome to entrust chip production to Samsung Electronics, which is a competitor in the smartphone market." The insider added, "Ultimately, for Samsung Electronics to grow its foundry business, expanding and securing stable customers through spin-offs is important, which is why the spin-off rationale is gaining credibility."

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