SK Hynix System IC will sell 49.9% equity of its Wuxi wafer foundry to Wuxi Industrial Development Group for $349.3 million to expand the company's influence in the Chinese chip foundry market with huge growth potential.

According to a regulatory document and semiconductor industry sources, SK Hynix System IC has recently signed an agreement to sell 21.3% of its Wuxi wafer factory shares to Wuxi Industrial Development Group for $149.3 million. The transaction will be completed in October this year.

Wuxi Industrial Development Group Co., Ltd. will acquire an additional 28.6% of its shares through the issuance of $200 million new shares in the future.

SK Hynix System IC was established in 2017 and is a wholly-owned contract chip manufacturing subsidiary of SK Hynix. Currently, it controls 100% of the equity of the Wuxi wafer foundry.

After the equity sale, SK Hynix System IC will hold 50.1% of the shares in the wafer foundry, and Wuxi Industrial Development Group will hold 49.9% of the shares.

SK Hynix stated, "The company reached an agreement in July 2018 to establish a cooperative legal entity with Wuxi Industrial Development Group in order to build a factory in Wuxi, China, and to proceed with this process in sequence."

SK Hynix System IC's wafer foundry located in Wuxi was established in 2018, producing basic chips of 28nm or above on 8-inch wafers. These chips, also known as mature or traditional chips, are widely used in automotive power management systems, display driver ICs (DDIs), and IoT devices.

The wafer foundry industry is currently in a fierce competition for advanced technology, but mature chips still account for about 70% of the entire semiconductor market in terms of sales due to their widespread applications. Due to the surge in demand from Chinese electronics companies and electric vehicle manufacturers, China has recently become a major mature chip market globally.

According to IBS, a global industry research firm, it is predicted that due to the explosive growth in demand in China, the global mature chip market of 28nm and above is expected to grow more than twice as much by 2030 as in 2020, reaching $28.1 billion.

Chip industry experts have stated that SK Hynix System IC is selling equity in contract factories to Chinese companies, in order to strengthen its close relationship with Chinese companies and adapt to the mature chip boom in China, thereby potentially expanding its influence in the Chinese chip contract manufacturing market.

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