SK Group to acquire LG Siltron for semiconductor-based vertical integration

The SK Group and the LG Group agreed to hand over 51% of LG Siltron’s shares from the LG Group to the SK Group for 620 billion won (US$530 million) on January 23.

Once the deal is made through both companies’ shareholders’ meetings, LG Siltron changes its name to SK Siltron. At present, LG Siltron is supplying silicon wafers to SK Hynix and the deal, which is slated to be completed within this year, is expected to result in closer cooperation between the two.

The silicon wafer supplier was established in 1983 by the Dongbu Group and U.S. chemical company Monsanto. Its name was changed from Kosil to LG Siltron in 1990, when the LG Group acquired 51% of its shares. Subsequently, the group had to hand over its semiconductor business to the Hyundai Group during the IMF bailout in the late 1990s and this turned LG Siltron into a non-core subsidiary of the LG Group. In 2007, Dongbu sold 49% of the company’s shares to Vogo Fund and KTB PE and Vogo Fund creditor banks and KTB PE currently have the shares.

LG Siltron currently ranks fourth in the global 300mm wafer market with a market share of approximately 14%. It recorded an operating profit of 108.8 billion won in 2012, an operating loss of 18 billion won in 2013, an operating loss of 34.8 billion won in 2014 and an operating profit of 5.4 billion won in 2015. SK Hynix, in the meantime, posted an operating profit of more than one trillion won in the fourth quarter of last year. According to experts, its total operating profit for this year is estimated at around six trillion won.

These days, the SK Group is focusing on combination between its semiconductor business and new technology such as the Internet of Things and artificial intelligence. In this context, the group is purchasing a number of semiconductor equipment companies and material suppliers. For example, it acquired OCI Materials in 2015 for about 500 billion won.

The LG Group is likely to become more aggressive in the M&A market by means of the 620 billion won. Nowadays, the group’s subsidiaries like LG Electronics, LG Chem, LG Display, LG Innotek and LG Hausys are concentrating on automotive electronics and they achieved more than 5.5 trillion won in total sales with this business item last year. LG Chem recently merged with Farm Hannong and LG Life Sciences for business expansion in the field of pharmaceuticals and bio-agriculture.