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| SK hynix next generation DRAM plant in Icheon, Gyeonggi Province / Courtesy of SK hynix |
By Kim Hyun-bin
SK hynix is strengthening its semiconductor business to better meet the shortage in the global chip sector. The world's second-largest DRAM manufacturer inked a deal worth 4.74 trillion won ($4.3 billion) with Netherlands semiconductor equipment manufacturer ASML Holding to obtain its EUV scanner equipment for the next five years.
The move comes as the semiconductor sector is entering a super cycle which is expected to increase chip demand drastically. According to the company, the deal will help it secure mass production of next-generation chips and the payments will be made through five-year installments.
EUV has a wavelength 14 times smaller than the wavelength of ArF, the laser that is most widely used to carve transistors on silicon wafers, enabling more defined circuit patterns. Only Samsung Electronics and Taiwan Semiconductor Manufacturing Co. (TSMC) have implemented the technology.
The additional large investments come amid SK hynix's acquisition of Intel's NAND flash business worth 10 trillion won. The company is scheduled to pay 8 trillion won ($7 billion) for its first batch payment by the end of the year, while the remaining 2 trillion won needs to be submitted by 2025.
It is unknown how much SK hynix plans to inject for the EUV equipment this year but industry watchers believe the price to be in the hundreds of billions of won. The company is predicted to bring in up to three EUV equipment suppliers this year with each unit costing around 200 billion won. The EUV equipment will be implemented in the newly established M16 plan that aims to produce next-generation DRAM.
Although it is an investment for the future, the additional 5 trillion won will inevitably increase the company's financial burden. Last year, NICE Information Service downgraded SK hynix's credit rating from stable to unstable due to the pricy acquisition of Intel's NAND business. Moody's also put the company's outlook to negative.
In addition to the investments, there are other areas requiring financial assistance. The company announced it would set its dividends at 1,000 won by the year end and hand out an additional 5 percent of its free cash flow (FCF) to shareholders.
Luckily the company has nearly 4.94 trillion won in cashable assets and the semiconductor super cycle is expected to noticeably enhance its earnings, while the DRAM price has broken the $4 threshold for the first time since April 2019, soaring over 50 percent from Dec. 1 due to a global shortage in chips.
