Yuseong Group Chairman (6)
(Breaking) Yuseong Electronics Makes a Swift Investment Decision in Dongwoo Precision!
Yuseong Electronics’ Surprise Mega-Scale Investment
Will Dongwoo Precision Trading Resume?
Semiconductor Stocks Surge Across the Board!
Are Semiconductor Materials, Parts, and Equipment Stocks Waking Up?
The moment Yuseong Electronics announced that it would step in as the acquirer, every media outlet rushed out a breaking story. Analysts quickly began issuing forecasts, and with expectations that investment would pour into materials, parts, and equipment, the entire semiconductor sector started to stir.
The small shareholders who had been trapped in Dongwoo Precision threw both arms into the air and cheered like maniacs.
While I was still reading the article, a call came in from a friend at the company. I picked up at once.
Coworker: "Is that article really true?"
Me: "It must be."
Once Yuseong Electronics had stepped in, it was safe to say XRT Semicon’s takeover was dead in the water. No matter how high a price they offered, there was no chance the acquisition would be approved.
Sunwoo sounded stunned.
Sunwoo: "Wow. So it really can happen."
Me: "I told you it would."
XRT Semicon kept signaling that it wanted to acquire Dongwoo Precision, but the market had already decided the matter: Yuseong Electronics was effectively the final buyer.
Some people might have thought they could simply outbid them, but that would have raised a different problem entirely: how were they supposed to finance it? And even if they claimed to have support from a Chinese company, they could not say that out loud.
Besides, a semiconductor company wasn’t something you could simply buy because you had cash. CMIC had once tried to acquire the foundry division of the American semiconductor firm Nanotron, only to fail when the approval never came through.
No matter how dysfunctional the government might be, would it really hand a domestic conglomerate’s target over to a foreign company when the homegrown giant had already stepped in to buy it?
Dongwoo Precision’s stock was still under trading suspension, so the shares themselves could not be traded. But the corporate bonds could.
Dongwoo Precision’s credit rating was still investment-ungrade.
No one knew when the factories would normalize, or whether the company would ever return to profitability. But what did that matter if Yuseong Electronics was buying it?
To put it simply, it was as if a young man drowning in debt had suddenly been handed rich parents. When it came to loans, the wealthy parents could just pay them off on his behalf.
The moment news of Yuseong Electronics’ acquisition broke, the corporate bonds shot up to their issue price in no time at all.
I threw both hands into the air and cheered.
"Yes! This is why I invest in junk bonds!"
I felt like I finally understood the hearts of the fund managers who ran high-yield funds.
Because of this one deal, the future history of the semiconductor industry had changed. Depending on how I moved, I could reshape the world however I wanted.
Just as I was enjoying myself alone, an unfamiliar number called.
I answered first.
"Hello? Who is this?"
The other person introduced himself.
Yoo Jae-ho: "This is Yoo Jae-ho."
Me: I thought for a moment about who Yoo Jae-ho was, then realized he was the chairman of Yuseong Electronics.
Me: "Ah! Hello, Chairman."
Yoo Jae-ho: "What you said that day was correct."
Me: "About what?"
Yoo Jae-ho: "Dongwoo Precision truly was worth that much."
Me: "I’m glad to hear it."
I was genuinely relieved he had recognized it.
Thanks to that, I’d be able to sell the bonds at full value.
Yoo Jae-ho: "What are you planning to do with Dongwoo Precision’s corporate bonds?"
Me: "I’m going to sell them."
Yoo Jae-ho: "I heard you bought the subordinated BW. Isn’t it a little wasteful to sell now? If you hold it to maturity, you’ll be able to receive new shares."
If you held a BW until maturity, you had the right to buy new shares at a predetermined price. If the stock price at maturity was below the exercise price, it was worthless; if it was higher, you could pocket the spread.
The trading halt had not been lifted yet, but once trading resumed, the stock price would almost certainly shoot above the warrant value.
I said it as if it were the most natural thing in the world.
"I’m planning to separate the warrant and sell only the bond. I’ll take the shares later."
At my answer, Chairman Yoo Jae-ho burst out laughing.
"Hahaha! So that’s one way to do it."
Sell the bond first to lock in the profit, then either take the warrant as shares later or sell it for the gain. Either way worked.
The subordinated bond carried an annual interest rate of 7.6 percent. Even without the warrant, it was attractive enough.
Yoo Jae-ho: "I’m also considering what you mentioned before."
Me: "What was that?"
Yoo Jae-ho: "Acquiring fabless firms. I’d like to buy promising companies and help them grow."
I was more than a little surprised by that.
Yuseong Electronics was not especially aggressive when it came to mergers and acquisitions. Even when other IT companies were busy waging startup bidding wars, Yuseong Electronics had focused on its own R&D and facility investment.
Its design efforts had also gone into strengthening in-house capabilities rather than pursuing M&A. Unfortunately, that hadn’t produced any major success.
So why the sudden change of heart?
If Chairman Yoo Jae-ho was changing his mind, that meant Yuseong Electronics’ entire business strategy might be about to change with it.
After thinking it over for a moment, I could guess the reason.
Was it Dongwoo Precision?
A company he had once thought was just a pebble had turned out to be a diamond. Through this deal, he must have realized that rather than developing technology himself, he could achieve far greater success by picking good companies and buying or investing in them.
Yoo Jae-ho: "Do you have any companies you’d recommend?"
"Hmm. It’s not something I can answer that easily."
There probably wasn’t anyone who knew better than I did which companies would succeed in the future.
It felt a little strange to say it myself, but one word from me was worth more than consulting work that cost hundreds of millions of won.
Maybe from this point on, Yuseong Electronics would walk an entirely different path than before.
Yoo Jae-ho: "I won’t forget this favor, and I will definitely repay it."
A man of his stature wouldn’t make empty promises.
Still, Yuseong Electronics growing stronger was not a bad thing for me. I’d already profited from it myself, so perhaps this was a fine chance to make them owe me one.
I told him, "I recommend RD Quanet."
Yoo Jae-ho: "I think I’ve heard of it. Is that the company that designs automotive semiconductors?"
Me: "That’s right."
I was a little surprised inside.
I hadn’t expected him to know this company.
RD Quanet had originally been founded by four employees who left Qualcomm. Its cofounder and CTO, Peter Sandford, was already famous in the semiconductor world as a rising star.
Right now, it didn’t have much to show in terms of actual results. It was just a somewhat well-known name. But later it would stand out in the automotive semiconductor market and grow explosively.
If I remembered correctly, it was slated to go public on Nasdaq sometime next year.
By then, even if they had money, they wouldn’t be able to buy it because of merger approval issues.
"I also recommend NP Semi."
This company would later be acquired by Enple, after which it developed the NP1 chipset. What would happen if Yuseong Electronics bought this company instead?
"And I think it would also be good to increase your equity investment in ADM."
ADM was the company competing with Antel in the CPU market.
Well, “competing” was generous; in reality, its market share was under 20 percent, and it existed mostly to keep Antel’s monopoly in check.
Even that had collapsed when the Bull architecture failed.
But after the CEO was replaced by Janet Su, a Taiwanese American, the company underwent an aggressive restructuring. First they sold off the fab and transformed themselves from an IDM into a fabless company, slimming down their size. Then they went all-in on design.
The result was the REN architecture.
REN washed away the nightmare of Bull architecture and announced ADM’s comeback to the market.
They had barely managed to claw their way back to life, but they still weren’t at the level where they could take on market giant Antel head-on. For now, ADM had the image of being “worse than Antel, but cheaper.”
But that was only true up through this year.
The REN2 architecture that would be unveiled early next year would crush Antel’s contemporary chips in terms of performance.
On top of that, ADM would see remarkable growth in GPU design as well, to the point that it would be compared to Endovia. The company would truly take off.
Yoo Jae-ho: "Is ADM really worth that much?"
Me: "It’s worth even more than that."
ADM’s market cap was currently around 25 billion dollars.
At that level, Yuseong Electronics could theoretically acquire the whole company. But semiconductors were a strategic national industry. They were tied to security concerns, and antitrust issues were always present, so approval would be needed not only from the country involved but from related countries as well.
The U.S. government would never approve it, which meant that an actual merger was effectively impossible. But increasing equity investment? That was entirely feasible.
"There are two advantages to investing in ADM."
Yoo Jae-ho: "And those are?"
"First, you can cooperate in design. Yuseong Electronics is building up its own design capabilities, but there are still clear limits. ADM, on the other hand, designs not just CPUs but GPUs as well. They’re also preparing to enter the mobile sector, so they’d make a good partner."
In fact, Yuseong Electronics would later run into trouble designing mobile GPUs and end up forming a partnership with ADM. Partnership was a generous word for it, really; ADM would provide the design assets while Yuseong Electronics paid license fees and royalties, which was effectively outsourcing the design work.
Second, ADM was fabless. If you took an equity stake, wouldn’t it become easier to have them entrust their future production volume to you?
That part was just my guess.
Originally, ADM had dumped all of its production volume into PSMC anyway.
Yoo Jae-ho: "The relationship with Antel is the problem."
Yuseong Electronics had built a close cooperative relationship with Antel.
Ordinarily, computers contained Antel CPUs and Yuseong Electronics DRAM. If Yuseong Electronics increased its investment in ADM, it risked damaging its relationship with Antel.
Still, that was the kind of problem the chairman could sort out on his own.
That’s what they paid him for, wasn’t it?
If I’d spoon-fed him this much and he still couldn’t swallow it, there was nothing more I could do.
"If you’re going to invest, you should move quickly. The market is changing every single day."
Yoo Jae-ho: "Understood. I suppose I should set aside a day and buy you a meal sometime."
Me: "A meal won’t be enough."
If he did as I said, he’d be bowing to me before a year was up. If he didn’t, he’d be banging his head against the floor in regret.
My words made Yoo Jae-ho laugh again.
"Hahaha! Then I suppose I’ll have to buy you drinks as well."
"I’ll look forward to being treated."
Yoo Jae-ho: "Ah, and there’s one more thing I’d like to say."
Me: "What is it?"
Yoo Jae-ho: "Would you be interested in joining Yuseong Electronics?"
“……”
The chairman of Yuseong Group was personally offering me a job.
Was that what they called a chairman’s special appointment?
If this had been my previous life, I would have said yes in a heartbeat. But in this life, I was a little busy.
"I appreciate the offer, but I have other things I’m working on. I’m sorry."
Yoo Jae-ho: "That’s a shame. This is my number, so please save it. If you ever need anything, contact me anytime."
"I will."
Even among chaebols, how many people could say they were on direct calling terms with Chairman Yoo Jae-ho?
It was something I couldn’t even have imagined in my first life.
Even I could tell I’d come a long way.