The saving of Hynix

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The saving of Hynix


I went to the Hyundai Electronics (now SK Hynix) semiconductor fabrication headquarters in Icheon in the late 1990s. I applied for an internship program with the Hyundai Group and I went around the group’s units as a part of the program. The state-of-the-art facility producing memory chips was a silhouette of concrete with small windows. The staffer guiding us through the wafer fabrication facility said the building was completed in just a year. Hyundai used gigantic heaters to dry the concrete more quickly during construction in the winter.

Hyundai Electronics merged with LG Electronics as one of the mega-deals among chaebol units arranged by the Kim Dae-jung government following the Asian financial crisis and international bailout of the late 1990s. In 2001, the company’s name was changed to Hynix Semiconductor. Despite rapid growth that made it the world’s second largest memory chipmaker, the company found itself on the brink of insolvency when prices of its primary source of income, dynamic random access memory (DRAM) chips, fell sharply.

Hynix posed one of the biggest challenges for its creditor banks along with Daewoo Motor. I was covering the banking sector then. Fellow reporters were in agreement that the company could not survive on its own. The heavily indebted company couldn’t survive in a game that requires aggressive investments in facilities to get ahead because it had no money to invest. U.S. rival Micron Technology offered to buy the company at a bargain sale price. The government and creditor banks wanted to get rid of the company. But they could not push ahead with the deal because of the employees. Hynix employees asked for bailouts offering their “pride and soul” as collateral.

Half of the 22,000 employees volunteered to leave the company to save it. Those who remained froze their salaries five times. The 200mm (7.87 inches) wafer fabrication facility was changed to a 300mm facility because the company could not afford to build a new one. Through inventive recycled manufacturing, it saved 950 billion won ($858 million) in investment costs. The employees built bridges to connect the four fabrication units and carried boxes of processed goods themselves. They worked as if engaged in a life-or-death battle. A book one corporate executive wrote about his experiences at Hynix was entitled “21st century Nanjung Ilgi,” named after the war diary kept by Admiral Yi Sun-sin of the Joseon Dynasty as he waged sea battles with Japanese invaders.

Their desperate struggles brought about a miraculous improvement in productivity. In 1995, there were 26 DRAM makers. All Japanese electronics giants were in the game including NEC, Hitachi, Toshiba, Mitsubishi and Fujitsu. After a game of chicken with price cutting, only three - Samsung Electronics, Hynix and Micron - were left standing. Micron acquired Elpida of Japan, but it still remains in third place.

I revisited SK Hynix’s factory base last weekend. It was brimming with life and vivacity after the company reported its largest profit ever last year. The world’s biggest wafer fabrication unit was under construction. One cannot miss the lofty cranes along the Yongdong Expressway when passing the Hynix factory in Incheon. The construction site is 333 meters (364 yards) long and 160 meters wide. It could fit more than seven soccer fields inside. It will take only 14 months to build the enormous facility because precast concrete engineering technology is used. One company official said the costly advanced method was used because it would cut construction time by four months. Speed is the key to competitiveness in wafer fabrication.

SK invested a total of 15 trillion won to renovate the Hynix’s Icheon production lines at the order of its chairman Chey Tae-won. The company’s future is bright thanks to its aggressive corporate investment and its employees’ spirit.

The Hynix turnaround can provide a solution to the entire lethargic Korean manufacturing sector. Kyung Jong-min, a professor at the Korea Advanced Institute of Science and Technology who campaigned avidly against selling Hynix to an overseas buyer, said, “Let’s assume Hynix was sold to a foreign buyer. What would the company manufacture then? Shoes or sportswear? Our young people who have studied engineering need to have a place to go after graduation. A company producing a key future technology must be allowed to continue with no other business than semiconductors.”

JoongAng Ilbo, Nov. 26, Page 34


*The author is an editorial writer of the JoongAng Ilbo.

by Cheong Chul-gun




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