Contracts with semiconductor companies are extremely lucrative as once a producer qualifies and installs a particular manufacturer’s tool, it becomes an integral part of the process, which is essential to keeping production steady and of high quality. SK Hynix (000660.KS), the world’s 3rd largest semiconductor producer had installed between 350 and 400 tools made by South Korean supplier Mujin Electronics (pvt) over the last few years to remove microscopic particles and films from wafers before and during processing. While this relationship was essential to Mujian, it seems that top executives decided to sell a cleaning tool that the company had developed with SK Hynix, to a Chinese competitor, Changxin Memory Technologies (pvt) (aka CMXT), which did not sit well with Hynix or the Korean courts, who have indicted and jailed those executives.
SK Hynix has asked tow of its other suppliers, TES (095610.KS) and KCTech (281820.KS) to develop wafer cleaning tools to replace Mujian as a supplier, however such a process takes time and SK Hynix was forced to continue to purchase from Mujian as it built out its M16 fab last year. Samsung Electro-Mecanics (009150.KS) also produces such wafer cleaning equipment, however SK Hynix’s biggest competitor in the memory market, Samsung Electronics (005930.KS) is both parent to SEMES and its biggest wafer cleaning customer, so it would rule out that alternative.
Why Mujian management would risk what had been a very lucrative contract and development relationship with SK Hynix is beyond understanding, although we expect it was likely more than just the sale of a tool to a new potential customer. It would have to be quite obvious that such a competitor would spend virtually any amount of money to obtain a tool it thought was key to a competitor’s process in order to have access to what was proprietary technology. While we have not read the court records, we expect it was a bit more than a night out on the town for those involved.
SK Hynix has asked tow of its other suppliers, TES (095610.KS) and KCTech (281820.KS) to develop wafer cleaning tools to replace Mujian as a supplier, however such a process takes time and SK Hynix was forced to continue to purchase from Mujian as it built out its M16 fab last year. Samsung Electro-Mecanics (009150.KS) also produces such wafer cleaning equipment, however SK Hynix’s biggest competitor in the memory market, Samsung Electronics (005930.KS) is both parent to SEMES and its biggest wafer cleaning customer, so it would rule out that alternative.
Why Mujian management would risk what had been a very lucrative contract and development relationship with SK Hynix is beyond understanding, although we expect it was likely more than just the sale of a tool to a new potential customer. It would have to be quite obvious that such a competitor would spend virtually any amount of money to obtain a tool it thought was key to a competitor’s process in order to have access to what was proprietary technology. While we have not read the court records, we expect it was a bit more than a night out on the town for those involved.
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