The foremost provider of advanced ceramic heaters, ESCs and parts is responding to the increasing demand for ALD processes.
Through the success story of Korean MNCs who have dominated both consumer markets and high-tech industries, Korea saw the emergence of domestic suppliers. As the Korean industry continues to grow into a key global player, critics claim that the SME sector might find itself ‘sandwiched’ between new and established manufacturing powers that will limit their international expansion. To what extend do you agree with this argument? How can SMEs better diversify their client base and reduce their dependence on Korean MNCs?
I agree with this argument only to a certain extent, as many SMEs, including ourselves, have systematically overcome various obstacles and successfully penetrated global markets. Therefore, it is unfair to generalize the entire notion. The 'sandwich theory,' coined by critics, was first introduced in 2007 by Gun-Hee Lee, the ex-chairman of the Samsung Group, to conceptualize the challenges we faced. It is ironic that this theory resurfaces after 17 years, illustrating the cyclical nature of industry challenges. In the early 2000s, emerging economies became global manufacturing hubs, leveraging price competitiveness, while advanced economies like the US, Japan, and European countries capitalized on technological prowess, diversifying into cutting-edge and high-value products. Korean SMEs navigated these challenges by bridging the technological gap with advanced economies while maintaining price competitiveness against emerging markets. This fostered the development of top-notch technology products and enabled successful global market penetration. In 2023, 16 Korean SMEs achieved over $100 million in exports, with multiple firms specializing in semiconductor or battery technologies garnering acclaim. Similarly, our company, MiCo Ceramics, successfully entered the global market by developing aluminum nitride ceramic heaters, overcoming higher entry barriers compared to metal heaters.
Allow me to elaborate on how Korean SMEs can reduce reliance on MNCs. Primarily, enhancing our capacity to secure key technologies, including intellectual property, and pioneering global markets is imperative. Specialization within a specific sector can reduce dependence on Korean MNCs and diversify client portfolios. Investing heavily in research and development to secure intellectual property early on facilitates global market penetration. The spirit of entrepreneurship is crucial in broadening perspectives and envisioning substantial growth opportunities. For instance, a CEO of a primary battery company I know spends half the year overseas attending exhibitions and meeting clients globally, resulting in over 70% of revenue from international clients and leading market share in their sector despite being an SME.
While seemingly theoretical, delivering high-quality technology at competitive prices can establish us as market trendsetters. Moreover, establishing robust global expansion systems and prioritizing environmental, social, and governance (ESG) management are paramount.
Allow me to briefly outline MiCo Ceramics' business plan established last year and our progress. Firstly, we focus on developing innovative products using advanced technologies and identifying potential clients post-development, seizing new business opportunities to propel company growth. Securing advanced intellectual property is crucial for performance differentiation and long-term survival. Secondly, we prioritize early stabilization of mass production, leveraging past experience in various production processes. We seek new OEM clients to apply our high-performance items to advanced manufacturing processes in chip-making. Thirdly, we enhance production and quality through the “5M1E (Man, Method, Machine, Material, Measurement, Environment)” principle in our production process, emphasizing automation and smart factories for efficiency and cost-effectiveness.
Lastly, we strive to meet global ESG standards by conducting onsite inspections, enhancing safety, and environmental measures. Information security is also prioritized, and we aim to align with global standards through transparent management, eco-friendly practices, and social responsibility, thus fulfilling our role as a social enterprise.
In recent months, international governments have rolled out trade policies aimed at promoting supply-chain realignments. One of the best examples has been the Biden Administration’s Inflation Reduction Act and Chip Act, which is offering billions of dollars in subsidies to American companies and trade partners for the development of technologies key to innovative applications, such as clean energy, battery and semiconductors. This policy is creating opportunities for Korean enterprises, as it positions them as an attractive option for the creation IRA-compliant supply-chains. What opportunities does this global realignment create for Korean companies? How well positioned is Korea to benefit from these strategies?
The recent global supply chain realignment presents significant opportunities for Korean companies, particularly given our leading position in the semiconductor and battery markets. Increased subsidies and incentives for Korean giants such as Samsung Electronics, SK Hynix in semiconductors, and LG Energy Solution, Samsung SDI, and SK On in batteries, will foster strategic partnerships with US-based firms, thus stabilizing their businesses. Many secondary battery manufacturers have already entered the US market, and Samsung Electronics is progressing with plans to establish a $17 billion fab in the US. This initiative is poised to incentivize further investments by mitigating initial risks associated with constructing such facilities, which demand substantial capital. Moreover, it opens doors for Korean SMEs to expand globally, as many specialized parts, materials, and equipment SMEs in Korea collaborate with conglomerates within particular supply chains. This mutual growth is anticipated to yield substantial benefits.
For instance, KoMiCo, a major shareholder of MiCo Ceramics, penetrated the US market in 1999 when Samsung Electronics constructed its Austin plant, providing products and services locally. Leveraging this opportunity, KoMiCo established its branch and factory in the US. Initially, Samsung Electronics was their sole client, but leveraging their reference and technology, they expanded their client portfolio to include Intel and Micron.
Nevertheless, there are inherent risks associated with global supply chain restructuring. Companies entering the US market under the IRA or Chips Act will encounter challenges. For instance, the founder of TSMC noted that building a factory on US soil incurs costs 40 to 44% higher than those in Taiwan, with foundry manufacturing costs 50% higher.
Elaborating on key challenges faced by SMEs, the stringent conditions under the IRA or Chips Act mandate SMEs to share excess profits with the US, despite being partially funded by their incentives. Other challenges include high inflation, labor shortages, and elevated manufacturing costs, leading to pricing and potential oversupply issues. However, the way forward for Korean SMEs lies in leveraging the global supply chain realignment strategically, through partnerships and by addressing risks and challenges inherent in the process. With increasing demand for AI, high-performance computing, smartphones, IoT, driverless vehicles, and EVs anticipated in the future, Korean companies stand to benefit from this realignment.
Regarding the 44% cost increase in the US compared to Taiwan, historically, foundries shifted to Asia, particularly for back-end processes, due to the labor-intensive nature of the industry, especially in microchip bonding. As the US aims to regain manufacturing prowess to compete with its Asian counterparts, how crucial is factory automation and robotics in reducing reliance on human labor while also leveling the playing field in terms of pricing and manufacturing costs?
Factory automation and robotics play pivotal roles in modern manufacturing. The US endeavor to compete with Asian counterparts necessitates leveraging automation to mitigate labor costs and enhance competitiveness. As we observe in semiconductor fabs today, human manpower has significantly dwindled, replaced by automated processes. Previously, operators were abundant, but now their presence is scarce. Engineers oversee operations remotely, conducting experiments and analyzing results online. While technicians and engineers remain crucial for facility maintenance and troubleshooting, the reliance on human labor has diminished. However, maintaining price competitiveness in the US remains challenging. Even TSMC has increased chip prices by 10 to 30% for chips manufactured in the US. Achieving price competitiveness is indeed formidable, especially considering the US's aspiration for in-house production of strategic chips like AI chips.
A recent development caught my attention: the US Department of Commerce announced that the actual incentive budget for companies is only half of what's requested from the companies. This discrepancy implies that many companies have filed claims exceeding the available budget. Consequently, companies like TSMC and Samsung, despite making investments, are still awaiting confirmation on budget allocations. This bureaucratic delay underscores the challenges inherent in navigating incentive programs amidst high demand and limited resources.
Gangneung Factory
MiCo Ceramics was established in 2020 through the spin-off of the semiconductor equipment parts business division from MiCo Co., Ltd. In a previous interview last year, Moonweon Yeo mentioned considering an IPO and aiming to reach the objective of KRW 200 billion by 2026. Are you still considering an IPO today? What will be the key drivers to reach the KRW 200 billion objective by 2026?
Yes, we are still considering going public. We believe that an IPO is crucial for securing new growth momentum in the future, particularly in terms of investing in R&D and expanding our capacity. Our decision to postpone the IPO in 2021 was due to the valuation not meeting our expectations amid a sluggish stock market. Internally, we are discussing listing on KOSDAQ in the latter half of 2025, although the timeline remains flexible depending on market conditions. The primary focus is to expand our production capacity through investments in ceramic heater and ceramic ESC production facilities to achieve our revenue target of 200 billion KRW by 2026. We anticipate a smooth execution of our capital resource investment plan, as increased production capacity will lay the foundation for reaching our revenue goals.
We expect exponential demand for our products, especially as semiconductor industry growth accelerates and new fabs are constructed. With this surge in demand, we anticipate winning more orders for ceramic heaters, driven by both fab construction and client demand for advanced semiconductors amid intensifying competition. To meet this demand, we are actively expanding our ceramic heater production capacity. Securing new sites in Gangneung city, Gangwon province, we aim to complete construction of the new factory by 2025. Similarly, as demand grows for specialized ESCs like HARC (high aspect ratio contact) and ultra-low temperature ESCs, we plan to establish an ESC-dedicated factory in Anseong City by 2025. Moreover, with new fabs coming online in the semiconductor industry, we foresee increased demand for our general ceramic parts. Leveraging our technological expertise and established references, we anticipate heightened demand for our consumable parts in the market.
MiCo Ceramics is mainly focus on developing heaters and electrostatic chucks, which are crucial for front-end applications involving processes like layering, stacking, and coating, often repeated numerous times. Your field appears to be growing faster than the semiconductor sector itself, driven by increasing process complexity with more layers and variations. Could you elaborate a bit more on your expected revenue for these different businesses and how your portfolio synergizes with your clients?
Our capital investment in the factories to be established in Anseong and Gangneung City exceeds our current total revenue. These investments are not solely aimed at achieving our revenue goal for 2026 but are rather forward-looking, anticipating growth at least until 2028. We project revenue of 300 billion KRW by 2028, and we are designing these two factories with that production capacity in mind. Our portfolio of heaters and electrostatic chucks aligns perfectly with the evolving needs of our clients in the semiconductor industry. As processes become more intricate, requiring increased layering and variation, our specialized products become even more indispensable. By investing in expanding our production capacity, we are positioning ourselves to meet the growing demand of our clients while also driving our own revenue growth.
You're ramping up production capability based on projected growth in the semiconductor industry, particularly driven by foundries in Japan, the US, and Korea. However, you're also in an intensely competitive marketplace, contending with companies like Kyocera, Murata, NGK, and Shibaura Electronics, among others. What do you believe are the core competencies that will allow MiCo Ceramics to compete against this international competition?
Let me first expand on our growth potential. Our flagship products, ceramic heaters, and ceramic ESC, hold substantial revenue growth potential. While we've made steady progress with our ceramic heaters, we acknowledge that we currently trail leading Japanese companies in market share. However, with the increasing adoption of the ALD process in advanced semiconductors and the rise of 3D technology, we see significant opportunities. The single wafer ALD market, a major client for our heaters, is projected to grow exponentially from $2.6 billion to $5 billion by 2027. Demand is shifting towards high-temperature heaters capable of withstanding over 650 degrees Celsius, aligning with our ongoing development efforts in partnership with clients. Some projects have already transitioned to mass production, promising substantial revenue growth potential.
In terms of growth rate, ceramic ESC holds the most promising prospects. Our HARC ceramic ESC is a highly specialized product requiring cutting-edge technology, with only a handful of companies worldwide capable of its development and manufacture. As the layers in 3D NAND flash memory increase from 200-300 to 500-600 and potentially over 1000 in the future, demand for high aspect ratio contact etching processes will soar, driving investment in these devices. Positive feedback from clients indicates that our advanced technologies are well-positioned to meet this demand, translating into tangible revenue growth.
Now, let's discuss how the technologies in our portfolio create synergy. The development and production of ceramic heaters and ESCs require various technologies, including design, simulation, ceramic powder handling, sintering, bonding, precision machining, material analysis, and quality control. We conduct all these processes in-house, with our engineers deeply involved in technology development. As these components play vital roles in the process chamber, directly impacting performance and yield, synergy between ceramic heaters and ESCs is paramount. Originally used for ALD and CVD, ceramic heaters and ESCs now complement each other, with advancements in one technology enhancing the other's performance. There's a growing demand for technology convergence, such as high-temperature ceramic heaters equipped with electrostatic chucks for flattening distorted semiconductor wafers, as well as mid to low-temperature ceramic ESCs. This technological synergy holds the potential to drive innovation and foster the creation of more advanced products in the future.
MiCo Ceramics has successfully attracted domestic customers such as Samsung Electronics and Wonik IPS, as well as international firms like ASM International. With collaboration with domestic and international players, what advantages have led these clients to choose to work with you instead of historical Japanese leading companies? Additionally, which other clients would you like to work with, and do you believe you have the technologies to enhance their equipment?
We maintain close collaboration with equipment companies both at home and abroad, and I believe several factors contribute to our success in this regard. First and foremost, our competitive edge lies in our exceptional technological prowess and development capacity. While we may lack the lengthy history of some leading Japanese companies, our strength lies in our in-house production of cutting-edge technologies. We have dedicated engineers committed to advancing these technologies continuously, with the ultimate goal of securing them as intellectual properties. Working closely with world-renowned clients enables us to identify their needs and develop a long-term technology roadmap to produce products that meet and exceed expectations. This approach has enabled us to develop high-performance ceramic heaters and ceramic ESCs that are unrivaled globally.
Another advantage is our ability to deliver newly developed products rapidly and commence mass production in a timely manner. Developing a final product that meets our clients' expectations typically involves several rounds of prototyping, ranging from a minimum of three to four times to as many as ten times or more, including design, trial testing, and revision processes. We maintain close communication with our clients from the outset of development to ensure their needs are fully integrated into the process. Additionally, we respond promptly to any feedback, reducing development lead times. By consistently increasing our production capacity to meet client deadlines, we can mass-produce products and deliver them promptly. This rapid response has fostered trust with our clients, enabling us to diversify our client base and solidify our position in the market by enhancing our core capabilities.
Looking at your portfolio, we've noticed that aluminum nitride heaters can also be applied to CMOS technology in a manner similar to that used for non-memory chips. How can your aluminum nitride technology be utilized for chips other than memory chips?
Our aluminum nitride technology is versatile and applicable to all types of chips, whether they are memory or non-memory chips.
We discussed the potential growth of your products driven by memory demand. What are your expectations, and how does this affect your approach to non-memory chips and CMOS sensors?
I foresee potential applications in the future expansion of the 3D NAND memory sector, logic, and 3D DRAM. However, I cannot speak definitively about the CMOS imaging sensor as I have not yet explored that area extensively.
MiCo Ceramics has already established partnerships with major players both in Korea and globally. What is your international strategy, and what do you see as the key opportunities for achieving your strategic goals by 2026 and 2028?
From our inception as a specialized ceramic parts company, we've been committed to expanding onto the global stage. This commitment is driven by our continuous enhancement of technological capabilities through strategic partnerships with international clients, coupled with diversification of our client portfolio, both domestically and abroad. Our efforts were recognized with the prestigious $30 million export tower award in 2023, underscoring our success in the global market. Looking ahead, we believe the global market will only become more critical, especially with the establishment of additional fabs in the future. To proactively penetrate overseas markets, we closely collaborate with clients from the equipment development phase to ensure seamless integration of our parts into their equipment as a standard. Furthermore, we relentlessly strive to equip various fabs with equipment incorporating our products.
We see significant growth potential in the US mainland. With the enactment of the Chips Act, investments in fabs from overseas are expected to increase, making the US market even more significant. Additionally, the US mainland hosts several tech giants focusing on AI, with our largest client situated there as well. Should Intel, Micron, TSMC, and Samsung Electronics continue to invest in the US, our largest client stands to secure more orders from these chipmakers, particularly for ALD equipment. This, in turn, will drive demand for our high-performance ceramic heaters.
On a related note, the ALD process is experiencing a surge in demand. While previously, CVD-driven layers were prevalent, there's a shift towards the ALD process due to its atomic layer deposition nature. Although ALD processes entail thin layers and require significant time and equipment, the demand is increasing because thicker CVD layers can distort wafers. This trend underscores the growing importance of our technology in meeting industry demands.
As the CEO of MiCo Ceramics, what other milestones would you like to achieve by 2033?
I believe our foremost priority is to cultivate a team of exceptional engineers to drive our technology development forward. Retaining top talent, particularly engineers, is a significant challenge for Korean SMEs. To address this, we're planning to construct a new building in Anseong city, which will serve as our new headquarters and house a dedicated factory for ESC manufacturing. My vision is to create an improved working environment at the new headquarters where our engineers can fully dedicate themselves to R&D activities. Additionally, I aim to enhance the attractiveness of MiCo Ceramics products by surpassing industry standards. I envision the creation of innovative products that inspire unwavering trust from our clients in terms of performance. Ultimately, I aspire for MiCo Ceramics to become the premier company specializing in functional ceramic parts worldwide, as ceramic heaters, ESCs, and consumable parts gain widespread adoption in semiconductor plants globally. This represents my personal corporate ambition, transcending mere revenue goals.
For more details, explore their website at https://www.micoceramics.com/en/
0 COMMENTS