South Korea’s second-largest memory chipmaker SK Hynix Inc. is working on establishing a foundry in a joint venture with a state entity in Wuxi, China, in hopes to ride on the high-tech evolution in China and shore up its revenue base from custom-made chip designs in the world’s biggest IT market.

The Korean company said Tuesday its foundry-focused affiliate SK Hynix System IC would form a joint venture with Wuxi Industrial Development Group, an investment firm under the Wuxi regional government, and start building the new foundry in the latter half of this year.

SK Hynix System IC would operate the joint venture and finance the facilities, including the 200 mm wafer manufacturing equipment, while Wuxi Industrial Development Group would provide infrastructure support.

The foundry is expected to be completed in the second half of 2019. SK Hynix plans to relocate its 200mm M8 equipments from its fab in Cheongju to the new foundry in China by 2021 but keep research and development capabilities at home.

The M8 factory in need of upscale has been operating on a limited client base and low profitability.

“This is part of our efforts to diversify our DRAM-reliant portfolio and secure new growth engines,” said a SK Hynix official. SK Hynix gets 80 percent of its revenue from DRAM.

SK Hynix entered the 200 mm CMOS image sensor (CIS) business in 2007 and spun off the foundry SK Hynix System IC in July 2017 to foster the business amid explosive demand to power big data-based technologies. The foundry in China will be upgraded to 300mm, the current norm for pure-play foundries.

A foundry receives orders from fabless companies and manufactures chips on given designs. Samsung Electronics and SK Hynix, despite being the world’s largest memory chipmakers, remain weak in the consigned market traditionally dominated by Taiwanese names. Taiwan Semiconductor Manufacturing Co. (TSMC) is the dominant market leader with a 55.9 percent share, with Samsung Electronics accounting for 7.7 percent and SK Hynix a mere 0.4 percent. Samsung Electronics has also spun off its foundry unit and is investing heavily to build a 10-nanometer fab to service customized chips.

Shares of SK Hynix closed Wednesday down 0.57 percent at 86,800 won.

By Lee Jae-cheol and Kim Hyo-jin

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