The SK Group has established an investment company for investment in semiconductor companies and components producers.
According to industry sources, the SK Group established SK Semiconductor Investments in Hong Kong in the third quarter of this year. It is a fully-owned subsidiary of SK Investment Management, which is controlled by SK Holdings, the group's holding company.
SK Semiconductor Investments is likely to be in charge of establishing joint ventures with global semiconductor companies. Although its starting capital is small now, SK Group subsidiaries like SK Hynix are expected to raise funds to increase its capital.
Industry analysts say SK Semiconductor Investments will take charge of investment in the Chinese semiconductor market as it originated from SK China Co., which transferred most of its shares in its subsidiary SK Investment Management to SK Holdings last year.
SK China recently participated as a limited partner in the US$600 million fund launched in July by Legend Capital, a Chinese investment company.
SK Semiconductor Investments is expected to invest big in China down the road. Analysts note that the company is headquartered in Hong Kong. Compared to China, Hong Kong has advantages in many aspects, including corporate tax. In addition, both English and Chinese are used in Hong Kong and, as such, notarization for investment in China can be easier. Hong Kong is also more stable than China in terms of labor affairs and foreign exchange fluctuations. Capital withdrawal in the event of corporate closure is easier in Hong Kong than in China, too. SK China Company is located in Hong Kong as well.
On the other hand, the establishment of SK Semiconductor Investments reflects the SK Group’s concerns. The single item of semiconductor currently accounts for more than 80% of the entire group’s operating profit, which means the entire group may become very unstable depending on market situations. The group is concentrating on biotech as another main growth item, yet its know-how in that field is still insufficient. Likewise, although it is focusing on electric vehicle battery manufacturing, it is a late starter in this field, which requires years of initial investment. In short, the SK Group should hang onto semiconductors for a while.
It is in this context that the group made an equity investment last year in Toshiba Semiconductor, which was the second-largest NAND flash memory manufacturer in the world last year. Still, the SK Group’s shareholding in Toshiba is limited to 15%, which means the equity investment was for defensive rather than offensive purposes.
Hong Kong is a global financial hub and the establishment of SK Semiconductor Investments there suggests that the group will push for a more aggressive investment strategy. Hong Kong is a place where it is easy to invest in not only Chinese but also American, European and Japanese semiconductor companies.
At present, SK Hynix has a market share of approximately 30% in the global DRAM market, but it still has a long way to go in the NAND flash and non-memory semiconductor business. For example, the company’s share in the global flash memory market stood at 12.1% in the second quarter of this year. Likewise, SK Hynix is a novice in the foundry industry, which is becoming more and more important with the progress of Industry 4.0. In other words, the establishment of the new investment company in Hong Kong has to do with the group’s pursuit of a more balanced business portfolio based on investment in non-DRAM market segments.