[TECH Weekly] Hana Micron Rides AI Boom to Global OSAT Growth

The [TECH Weekly] corner aims to share global macro issues and promising companies listed on the domestic KOSPI and KOSDAQ markets. As digital transformation accelerates, investor attention toward related companies is expanding in the stock market. As retail investment expands, identifying recent issues has become increasingly difficult.

Global investment in AI infrastructure is expanding. In step with that trend, the semiconductor back-end process, or OSAT, industry is also enjoying a boom.

Against this backdrop, Hana Micron is drawing market attention. Hana Micron is accelerating its next growth engines.

Hana Micron is a leading domestic semiconductor packaging and test specialist. Its business covers packaging and testing in the semiconductor back-end process.

Hana Micron is an OSAT(Outsourced Semiconductor Assembly and Test) company founded in 2001.

OSAT refers to outsourced semiconductor packaging and testing specialists. In the semiconductor back-end process, these companies cut chips made from silicon wafers, handle packaging to protect them from external shock, and also perform testing to check for defects.

In the past, OSAT was seen as a simple subcontractor. However, as the importance of advanced packaging technology for high-performance chip integration has grown in the AI era, OSAT has recently emerged as a key partner in the semiconductor ecosystem.

Samsung Electronics and SK hynix are classified as large integrated device manufacturers(IDMs). However, as handling all back-end processes in-house imposes significant costs and time burdens, outsourcing to OSAT companies with proven technological capabilities is increasing.

Hana Micron has recently made progress in establishing overseas bases in Vietnam and Brazil. Based on this, it has built a global production system connecting its domestic headquarters, Vietnam, and Brazil, improving cost competitiveness and strengthening its ability to respond to local needs.

The company assigns different functions to each subsidiary by country and operates production, profitability, and technology development systems separately. The Vietnam subsidiary is the company’s core growth engine and a large production base that handles major customers’ large-scale memory and back-end process volumes. Based on excellent local labor and tax benefits, the Vietnam subsidiary is maximizing cost competitiveness and strongly driving earnings growth.

The Brazil subsidiary effectively holds a monopoly in the South American semiconductor packaging and testing market, which has high import tariff barriers. It supplies semiconductors for smartphones, automobiles, and home appliances and serves as a stable cash cow. The domestic Asan headquarters serves as a control tower overseeing the development of advanced high-difficulty packaging technologies, R&D for high-value-added products, and the initial mass production of high-value-added products.

The company is organically linking Korea’s strong technological capabilities, Vietnam’s large-scale mass production capacity, and Brazil’s regional monopoly position. Through this structure, it is efficiently responding to surging global semiconductor outsourcing demand.

Hana Micron is expanding its portfolio from traditional memory semiconductor packaging into advanced packaging. In response to the expansion of AI and HPC infrastructure, the company is pursuing the advancement of 2.5D advanced packaging technology that connects multiple semiconductor dies.

Hana Micron is moving ahead in earnest with infrastructure investment related to 2.5D advanced packaging. Through this, it is accelerating efforts to expand its business from a memory packaging focus into the advanced packaging segment.

The company has its proprietary HIC packaging solution technology and is strengthening its chiplet packaging capabilities based on that. It is also seeking to expand applications to automotive semiconductors and other areas beyond mobile and memory.

Hana Micron is concentrating its capabilities on verification and preparation for mass production to expand applications. At the same time, it is securing both turnkey solutions and advanced packaging capabilities beyond simple subcontract processing.

Hana Micron’s turnkey solution is a system that handles packaging through final testing in one package after wafer processing. Through this turnkey solution, the company is maximizing customer supply chain efficiency and pushing ahead with building differentiated technological competitiveness in response to changes in the global semiconductor back-end market.

Hana Micron is pursuing the development of proprietary advanced packaging technologies to respond to AI and HPC demand. Areas under development include 2.5D packaging and HIC-based solutions.

The company is also pushing ahead with building a mass production line for advanced packaging, targeting the high-value-added market. Hana Micron has strengths that could allow it to benefit from rapid growth in the AI and HPC markets.

Outsourced back-end volumes from large IDMs continue to expand, and Hana Micron is benefiting structurally from that increase in outsourcing. It is also securing stable volumes in traditional memory packaging, and this stable volume base is strengthening its earnings resilience.

As demand for AI accelerators and server semiconductors has recently surged, Hana Micron has a large-scale mass production system capable of responding to that surge in demand. The company has built global production bases centered on Vietnam and Brazil, and these bases are characterized by differentiation and strong cost competitiveness.

The Vietnam subsidiary’s large-scale facility investment has moved onto full track, and it is serving as a core engine of overall earnings growth by achieving cost reduction and economies of scale. The Brazil subsidiary effectively monopolizes the local market based on high import tariff barriers and is generating a stable cash cow. These diversified global bases are becoming a foundation for protecting profitability amid a rapidly changing external environment.

In addition to subcontract processing, the company has integrated capabilities covering packaging and final testing after wafer processing. Based on this, it has secured turnkey solution competitiveness, and it is being evaluated as capable of responding optimally to customer demands for supply chain efficiency.

Through these capabilities, it is firmly maintaining its share with major customers. Accordingly, expectations are rising for a sharp earnings turnaround tied to the semiconductor industry’s recovery, and expectations for valuation re-rating are also expanding.

On the other hand, a significant portion of revenue is sensitive to the memory semiconductor cycle, and a significant portion is linked to major customers’ investment trends. Sensitivity to the downstream industry is a major burden, and a macroeconomic slowdown could lead to lower utilization rates. If IT downstream demand falls short of expectations, earnings volatility could widen sharply, and the company also faces vulnerability to lower utilization and greater earnings volatility.

The company is pushing ahead with the expansion of overseas production bases in Vietnam and Brazil, and it is also pursuing the securing of technologies such as high-value-added advanced packaging 2.5D. However, this entails sustained and large-scale CAPEX, which could lead to higher debt and greater financial burden.

Hana Micron faces a structure in which fixed-cost burdens could increase if large-scale investment does not translate into short-term earnings improvement. Such fixed-cost burdens are seen as a factor pressuring profitability.

Another burden cited is the high dependence on revenue from a small number of major domestic IDMs. Changes in major customers’ in-house production strategies and supply chain diversification policies could translate into earnings risk, and unexpected order adjustments could also hurt performance.

Concerns have also been raised about the possibility of limited bargaining power within the global supply chain. These factors are presented as risk factors that could increase Hana Micron’s profitability and earnings volatility.

However, securities firms are maintaining a top pick view on Hana Micron. Recent broker reports highlighted that the company’s overall earnings turnaround is gaining momentum, citing profit growth at its global subsidiaries in Vietnam and Brazil as the basis.

The Brazil subsidiary is benefiting from concentrated local memory demand and has also begun supplying new products, which is analyzed as evidence of its high profitability. The Vietnam plant is benefiting from the expansion of outsourced back-end volumes from major customers, achieving economies of scale, and analysts say this makes further earnings upside possible.

Many securities firms have issued positive investment opinions on Hana Micron. They cited the company’s earnings visibility as a leading domestic OSAT company and expectations for benefits from the memory upcycle, and set target prices in the KRW 50,000 range to around the KRW 60,000 range.

A securities industry source said Hana Micron is a company that goes beyond a traditional back-end process player. The source also said the company is successfully pursuing a transformation into an advanced packaging value chain, an essential element in the AI era. However, the source advised that it would be effective to approach the stock from a medium- to long-term growth perspective while also monitoring short-term fluctuations in the semiconductor cycle and financial indicators tied to facility investment.

Source: TECHWORLD · Joo Ga-young
Original: https://www.epnc.co.kr/news/articleView.html?idxno=407137

References

• https://www.epnc.co.kr/news/articleView.html?idxno=407137