Page 19 - investor presentation

SK siltron 1 Semiconductor Materials

Deal Making (’16 ~ ’17) Value Up (’17 ~ on-going)

Identified early signals of supply shortage in silicon wafer, one of core parts Expansion and Improvement Bolt-On Acquisition
to manufacture high-end semiconductor chips, through SK Hynix
• Major chip makers, including SK Hynix, accepted sharp increase of silicon wafer price
in the range of 20~30%, for the first time in the past 11 years, to enable wafer capacity According to the Value Up Strategy, Based on SK’s battery and telecom
expansion expanded capacity by 1.7x industry expertise, SK forecasted the
Target • Capacity increase from 740k (pre-acquisition) to increasing adoption of power
Sector Based on SK Hynix in-house view of industry forecast, confirmed the 1,300 in 2021 semiconductor and acquired
attractive investment opportunities in silicon wafer market in 2017 onwards • Capex increased from U$70m (pre-acquisition) to DuPont’s CSS business in ‘20
• SK Hynix forecasted overall semiconductor market will grow at a CAGR of 10% over the U$500m per year on average • Global leading supplier of SiC Wafer, with
next 5 years, with Silicon Wafer market growing at a slower but still attractive rate of higher thermal conductivity, resistance
5% a year due to improving scaling technology (which requires less wafer for the same ‘000/m ‘17 ‘18 ’19 ’20 ’21 towards oxidation, chemical inertness and
density) mechanical strengths,
Capacity 782 929 1,035 1,185 1,288 ideal for better energy efficiency such as EV
car or 5G network
Utilization 99.6% 99.3% 94.4% 98.5% 99.7%
Leveraged SK Hynix supply chain network to identify potential
investment target, and found out LG Siltron was for sale
Deal • LG Siltron was one of global top 5 and the only domestic supplier in Korea, but it made Dispatched Siltron’s process engineers
Sourcing consistent losses despite capex requirement of ~$70 million every year Improved product quality and yield, to improve product quality and yield
• Its majority shareholder, LG Group, wanted to divest its loss-making, non-core business, leveraging internal experts and know-how • Strengthened local R&D capabilities and
while SK Group saw the silver-lining to acquire globally competitive supplier with local to become Global #1 quality supplier manufacturing efficiency/know-how
presence (selected by Samsung Electronics)
• Increase in sales price due to quality Enterprise Value (U$m)
Decided to acquire loss-making LG Siltron based on value-up strategy to improvement led to turning to profits right after
the acquisition
Deal turn-around the business, leveraging SK’s industry expertise and know-how 5.1 x 5,707
Review • Pre-emptive Value Up Strategy : Unit ‘17 ‘18 ’19 ’20 ’21
& 1. Planned to expand capacity by 200k per month instantly, using idled land and existing Flatness nm 220 189 148 136 102
Execution power grid, based on the judgment from internal manufacturing process engineers Particle ≥26nm 32.8 19.8 10.9 9.1 7.0 1,105
2. Identified the gap to increase sales price based on product quality improvements, which
ranked the lowest out of top 5 global suppliers by SK Hynix Vendor Assessment Yield % 87.8 89.1 89.9 91.1 92.3 2017 (Pre-acquisition) 2021 (Current)

Acquisition 605 466
283 294
Capex 69 47 62 63 134 260
(US$ million) 195 192 207
86
Net Profit (Loss) 6
(U$ million) (151) (43) (15)
’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21

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