Chairman of Yuseong Group (4)

Large conglomerates never relied on a single supplier, even for the same parts or materials. They spread orders across multiple companies to drive prices down through competition and to protect themselves against the worst-case scenario. But when it came to the EUV equipment used in lithography, there was no real alternative.

No one liked being dependent on a single company’s technology. That was why they had already been developing several approaches, such as NIL and DSA, yet none of them had produced any meaningful results. And if it were possible to transfer circuit patterns without contact—could that someday replace EUV?

The thought suddenly caught my interest.

“What was the debt amount again?”

“The corporate bonds and bank loans total 380 billion won. The compensation we may have to pay to YMCT is estimated at around 150 billion won.”

The executives all wore expressions that seemed to click their tongues in disbelief. Compared to the company’s asset size, it was the tail wagging the dog.

If we acquired them, we might have to pay all of that off ourselves.

President Joo Jun-ho spoke up.

“Recently, a company in Singapore called XRTSemicon has shown interest in acquiring them.”

“XRTSemicon is a fabless company, isn’t it? Do they really have that kind of financial power?”

“There are rumors that they have ties to CMIC.”

Yoo Jae-ho’s brow furrowed slightly.

“You mean there’s Chinese capital behind them?”

“Yes. Their largest shareholder is currently Big Tower Capital, a Hong Kong–based ‍‍‌‌⁠​​⁠‌​​‍​​‍​‌​⁠‍‌‍⁠⁠‌⁠‌‍‌‍‌‌‌‍⁠​‌​‌​‌‍‌‌‌⁠‍​​‌‍⁠‌‌⁠⁠private equity fund, and they mainly invest in semiconductor companies.”

Chinese companies were aggressively pursuing M&A deals with semiconductor firms all over the world, and it was an open secret that the Chinese government was backing them.

XRTSemicon’s founder, Jacky Huang, was an overseas Chinese.

Seventy percent of Singapore’s population was ethnically Chinese, so that in itself wasn’t strange, but he was also known to have close ties to figures in the Chinese Communist Party.

Could China be behind XRTSemicon?

China’s semiconductor technology was currently estimated to be about three years behind in manufacturing and two years behind in design.

In an advanced industry, that was an enormous gap.

But it was not a gap that inspired comfort.

Until just last year, the estimate had been five years behind in manufacturing and three years behind in design. In just twelve months, the difference had narrowed dramatically.

The amount of money the Chinese government poured into its semiconductor push was beyond imagination. Despite American sanctions, China’s semiconductor output kept rising at a staggering pace.

At least they still hadn’t been able to touch the cutting-edge process nodes. That was some consolation. But how long could that really last?

Chinese semiconductor companies were unable to bring in even a single EUV machine because of American sanctions, so they spared no investment in developing a technology that could replace it.

Yoo Jae-ho recalled what Han Miru had said.

He said that the technologies we use now were all things people once believed would never work.

Then what about this technology?

There was no telling how useful Dongwoo Precision’s technologies would be to Yuseong Electronics. But they would certainly be useful to CMIC.

Could we really just sit back and let CMIC steal that technology away?

Yoo Jae-ho thought it over carefully.

What if Dongwoo Precision falls into China’s hands, and NIL becomes the standard technology of the future?

Could a Chinese company that had once been seen as a latecomer end up grabbing us by the Achilles’ heel?

Of course, it might all be unnecessary worry. If I thought that way, I might end up trying to acquire every company in the market.

Yuseong Electronics had entered the semiconductor business in the late 1970s.

In a market already dominated by Japanese and American giants, Yuseong Electronics had built itself up from the ground, one step at a time.

Everything had been a chain of choices.

Memory or non-memory. DDR or Rambus. The Stack Method or the Trench Method, and so on.

If they had made even one wrong choice, the Yuseong Electronics of today would not exist.

Not acquiring Dongwoo Precision did not mean there would be a problem right away.

But what if this really was the horseshoe nail?

You could lose the horse over a single nail. And once you lost the horse, a vast kingdom could collapse like a sandcastle.

There was no law saying Yuseong Electronics couldn’t end up that way.

The executives gathered in the conference room kept their mouths shut and waited for the chairman to speak.

The decision was his alone.

That was what it meant to be chairman.

After finishing his thoughts, Yoo Jae-ho finally spoke.

“Arrange a secret meeting with Dongwoo Precision’s management and move forward with the acquisition.”

After reading the articles, small investors could barely hide their excitement.

Word spread that XRTSemicon would begin talks with the creditors, and Dongwoo Precision’s bond prices started to rise.

The bonds, which had fallen to 10 percent of face value, had now climbed back to around 30 percent.

Most analysts placed the odds of an XRTSemicon acquisition quite high. But then, in the middle of all that, news came in that no one had expected.

Director Ryu U-nyeong.

He was a professor at Tsinghua University, China’s most prestigious school, and also the head of the China Semiconductor Research Institute, a man at the forefront of China’s semiconductor push.

Under his direction, the Chinese government, universities, and corporations had worked together to pursue both technological development and a string of acquisitions.

China was a country that had to feed 1.5 billion people under a planned economy.

In advanced industries such as electric vehicles, drones, telecommunications equipment, and aerospace, it had already caught up to the developed world and, in some areas, even overtaken it.

But semiconductors, the very foundation of modern industry, were arguably China’s greatest weakness.

That was why China declared its semiconductor push and began investing with the goal of self-sufficiency.

To that end, semiconductor experts across China gathered to devise a thorough strategy ‍‍‌‌⁠​​⁠‌​​‍​​‍​‌​⁠‍‌‍⁠⁠‌⁠‌‍‌‍‌‌‌‍⁠​‌​‌​‌‍‌‌‌⁠‍​​‌‍⁠‌‌⁠⁠and carried out R&D and M&A in tandem.

Then the problem began.

The United States stepped in to stop it.

Washington announced that China’s semiconductor rise could threaten American security, and that not only American companies but also semiconductors made with American technology would be subject to U.S. sanctions.

But where in the world could you find semiconductors not made with American technology?

If the U.S. were to announce a total export ban right now, China’s economy would wither and die.

A blanket export ban on all semiconductors targeting a specific country was, in practical terms, no different from a declaration of war. That was why the U.S. Department of Commerce chose a more controlled method, designating prohibited companies and restricting materials, parts, and equipment in order to pressure China.

It was like drawing a clear line and warning them not to cross it.

The United States made its purpose unmistakably clear: it intended to strip China of its competitiveness in advanced technology. That dealt a devastating blow to the semiconductor push.

Acquisitions and technology transfers were blocked immediately.

Feeling the pressure, China only accelerated its semiconductor drive.

National President Lin Yuxiang emphasized the need for semiconductor self-reliance with the words, “Semiconductors are the heart of China’s economy. We cannot depend on outsiders for our heart.”

The effort bore some fruit. China’s semiconductor output grew by double digits every year, and the localization of materials, parts, and equipment progressed steadily.

The problem, as always, was the cutting-edge process.

CMIC had broken ground on a 7nm plant with support from the Chinese government, but it had no way to secure the equipment required to actually run it.

While PSMC and Yuseong Electronics were competing beyond 7nm and into 5nm, CMIC’s most advanced process was still stuck at 14nm, several generations behind.

The biggest reason was simple: they could not secure the lithography equipment.

There’s no way America will approve the export of EUV equipment. If Chinese semiconductors are going to move into finer process nodes, they’ll have to advance NIL.

Director Ryu U-nyeong began searching for the company they needed.

Then a mid-sized Korean company caught his eye. After finishing his analysis of Dongwoo Precision, Ryu U-nyeong made a forceful case.

“This is a company China’s semiconductor push absolutely needs. We must acquire it by any means necessary!”

From that moment on, the operation to acquire Dongwoo Precision began.

Through YMCT, they signed supply contracts, encouraged technology and equipment investment, and pushed for deliveries even at the prototype stage.

Fortunately—or perhaps unfortunately—defects appeared in the supplied equipment parts. YMCT deliberately shut down the factory and magnified the damage.

As a result, Dongwoo Precision was forced to halt production and deliveries, and on top of that, it was left facing enormous compensation claims.

At the same time, in Korea, corporate bond issuance had been suspended because of the Primus scandal. Dongwoo Precision failed to issue bonds and was pushed into workout proceedings.

This was the perfect opening.

If a Chinese company made the move, resistance was inevitable.

So they set XRTSemicon, a Singapore company, in motion instead. Since self-rehabilitation was impossible anyway, it would be easy enough to fold it into their hands.

XRTSemicon’s management contacted Dongwoo Precision’s leadership and worked out the terms. On the surface, the talks were about debt relief, but their real intent was something else entirely.

Technology transfer.

After the acquisition, they planned to transfer the technology to CMIC and poach the engineers and researchers too by offering salaries two or three times higher.

Everything is going according to plan.

Then something no one had expected happened.

Yuseong Electronics announced that it would acquire the company!

When he heard the news, Director Ryu U-nyeong shouted in shock.

“Why the hell would Yuseong Electronics get involved!?”

XRTSemicon president Jacky Huang replied.

Chairman Yoo Jae-ho personally ordered it. Vice Chairman Kwon Hyeok-jun is touring the production facilities and research center with the researchers now.

Yuseong Electronics was a long-term competitor of Chinese semiconductor companies, so they always kept a close eye on it. Dongwoo Precision’s technology was indispensable to CMIC, but it would be of little use to Yuseong Electronics. No matter how he looked at it, there was no reason for Yuseong Electronics to step in.

Since Yuseong Electronics already had a vertically integrated semiconductor chain, Chairman Yoo Jae-ho was not particularly aggressive when it came to mergers and acquisitions.

If he had been interested, he would have shown it long ago. So why now, all of a sudden?

There had to be some trigger.

What on earth happened over the last few days?

In private, Director Ryu U-nyeong had looked down on Chairman Yoo Jae-ho. Maybe Chairman Yoo Myung-hoon, the former chairman, would have been another matter, but he had never considered Yoo Jae-ho to be a real opponent.

Someday, Yuseong Electronics would kneel before China’s semiconductor rise!

That was what he had thought, only to be hit with an unexpected blow.

At any rate, now that Yuseong Electronics had stepped in, the acquisition might as well be considered dead. They had lost, at the very last moment, a company that was indispensable to China’s semiconductor ambitions.