Severance Package Includes 12 Months’ Salary and $17,000 Stipend

SK Hynix System IC, a subsidiary of SK Hynix specializing in 8-inch wafer foundry services, is implementing a major workforce restructuring due to the prolonged downturn in the semiconductor industry. According to industry reports on December 29, the company has begun accepting voluntary retirement applications from both its overseas production workers and domestic employees in South Korea. The severance package includes one year’s base salary, a 25 million KRW ($17,000) stipend, and tuition assistance for employees’ children.

Challenges in the Foundry Business

SK Hynix System IC operates an 8-inch foundry focused on power management ICs (PMICs), display driver ICs (DDIs), and image sensors (CIS). In February 2022, the company closed its M8 plant in Cheongju, South Korea, relocating its equipment to overseas facilities as part of its business expansion.

In October 2021, SK Hynix acquired Key Foundry for 576 billion KRW ($391 million). Key Foundry, spun off from MagnaChip Semiconductor in 2020, had a monthly capacity of 82,000 8-inch wafers and specialized in PMICs, DDIs, and microcontrollers (MCUs). In 2021, Key Foundry reported sales of 616 billion KRW ($418 million).

However, the company has faced significant challenges, including aggressive price competition from Chinese foundries. According to its 2022 financial report, SK Hynix System IC recorded an operating loss of 17.1 billion KRW ($11.6 million) last year, despite implementing unpaid leave policies to mitigate losses.

Market Dynamics and Restructuring

The restructuring is attributed to deteriorating profitability caused by local market policies and aggressive pricing by Chinese competitors. Reports indicate that Chinese foundries have been accepting orders at prices 20-40% lower than average to maintain factory utilization rates.

An SK Hynix System IC representative stated:

“This measure is a response to worsening business conditions caused by the delayed recovery of the 8-inch foundry market. It is unrelated to broader group restructuring.”

The company emphasized that despite various efforts to improve performance, the prolonged downturn necessitated the voluntary retirement program as a self-rescue measure.

SK Hynix’s Position in the Semiconductor Market

According to the Korea Institute for Industrial Economics and Trade (KIET), SK Hynix held a 5.9% share of South Korea’s domestic system semiconductor market in 2022, ranking third behind Samsung Electronics (73.9%) and LX Semicon (11.2%).

This restructuring highlights the ongoing challenges faced by the foundry business, particularly in a competitive landscape dominated by aggressive pricing strategies and slow market recovery.