The world’s second largest memory chipmaker SK Hynix is reportedly weighing to acquire the foundry operation of Korea-based MagnaChip Semiconductor Corp. located in its logic chip complex in Cheongju to bulk up its fledgling customized chip production that can be less volatile than the memory chip segment.

SK Hynix has yet to make the bid official, with JP Morgan lead-managing MagnaChip’s spinoff scheme expected to announce a preferred bidder by the end of this month or early next month.

MagnaChip, a logic chipmaker trading on the Nasdaq, while releasing 2018 revenue growth of 10.5 percent to $750.9 million on operating margin of 26.4 percent in February announced that its legal and financial advisers were “undertaking a strategic evaluation of the Company’s Foundry business and Fab 4 with options including joint ventures, as well as M&A opportunities.”

The offer came at a time when SK Hynix was strengthening foundry business after spinning it off as a separate entity SK Hynix System IC in 2017 and also is building foundry in a joint venture in Wuxi in China.

Merging the wafer lines of MagnaChip poses the best option to make up the void in domestic foundry business as they are located in SK Hynix System IC compound in Cheongju as the company used to be one of its own before the non-memory unit was spun off and sold off to foreign capital in 2004 amid liquidity crisis of Hynix.

Although second largest in DRAM and a major flash memory supplier, SK Hynix’s revenue from consignment system-on-chips remains pitiful at $260 million and takes up just 0.4 percent of global wafer market to rank 24th. MagnaChip reaps bigger revenue as foundry accounts for about 45 percent of its revenue and is estimated to rank 15th.

Nearly 80 percent of MagnaChip is owned by a number of foreign investors, including U.S. Brigade Capital Management (10.64 percent), Oaktree Capital Management (9.53 percent) and Evermore Global Advisors (9.5 percent). Its employees amount to more than 2,500. The company’s market cap stood at $285 million on Nasdaq as of Apr. 18.

SK Hynix is expected to go up against Chinese contenders including state-owned investment firm Jianguang Asset Management under China’s ambitious goal on semiconductor localization.

MagnaChip also designs and produces display and power drive chips and runs a plant and R&D functions in Gumi in addition to its foundry plant in Cheongju.

SK Hynix is migrating to 300 mm and can benefit from the MagnaChip’s mainstay 200mm-based technology that still remains popular for fabless chipmakers amid growing need for chips in the fourth industrial age.

Shares of SK Hynix ended Tuesday 0.6 percent higher at 81,000 won.

By Kim Gyu-sik and Minu Kim

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