Asian market: Korea: the Korean PCB industry showed fabulous growth in 2004. What's next for the peninsula?

This feature will examine the Korean PCB industry in detail from all angles. We will use the term "Korea" to refer to South Korea throughout the article.

The Korea Printed Circuit Association (KPCA) was formed two years ago, and is becoming more visible with its improving Web site, www.kpca.or.kr. Readers are encouraged to visit this Web site. It lists all KPCA members, including approximately 80 PCB makers, with links to their companies. The only problem is that just a few of the members' Web sites are available in languages other than Korean.

Large PCB makers are subsidiaries of conglomerates (chaebul in Korean), and therefore detailed information regarding their PCB activities are not spelled out. This author has compiled such information into TABLE 1.

Until recently Korean flex production was very tow, but now it occupies an important position in the Korean PCB industry. Unfortunately, it is not easy to obtain separate "bare board value" and "assembled board" from these manufacturers. Flex production values include the value of the assembled boards as well. Top Korean flex makers say that flex assembly by flex makers is still relatively small, but it is increasing rapidly. Judging from input obtained from a few top flex makers, approximately 20% of their current production comes from assembly (components, labor, equipment depreciation, etc.). Hence, "domestic bare board" production by the top 20 shops may be estimated at $3.4 billion (Interflex, the largest flex maker in Korea, reached $314 million, a total that's buried in Korea Circuit Group's numbers). The remaining 60 to 70 makers in Korea are estimated to have produced about $275 million. So, the total Korean production in 2004 was probably in the vicinity of $3.68 billion as seen in TABLE 2.

Korean production is now approaching the size of European production (approximately $4 billion inclusive of Eastern Europe). Growth from 2003 to 2004 was about 34%, the same growth rate China experienced.

Since the growth of flex has been so astonishing, we shall study Korean flex in more detail.

Flex Time

In addition to the asterisked (*) entries in Table 1, Samsung Electro-Mechanics (SEMCO), Daeduck Electronics/GDS Group (DDG), KCG (Korea Circuit Group), Isu/Petasys (PTS), LG Electronics's Digital Micro Circuit (DMC) and a few other traditional rigid board makers are now engaged in flex business as well. Collectively, they produced about $100 million worth of flex and rigid-flex circuits.

As mentioned previously, it is estimated that approximately 20% of Korea's flex value is estimated to have come from flex assembly, but this remark is based on a very few samplings taken from major flex makers. Therefore, 20% should not be accepted as an absolutely accurate figure.

As in the case of Japan, flex is now becoming a major portion of the Korean PCB industry. Together with cell phone boards, IC substrates, memory modules and LCD driver boards, flex is a major contributor to the growth of Korean PCB production.

The sale of KCG to the Young Poong group was approved at a March 2005 board meeting. D.H. Song, founder and chairman of KCG, decided to sell his company because he lacked an heir and he wanted the company to prosper in the future. KCG's subsidiary, Korea Circuit America (KCA) will remain a part of the Song family, with a son-in-law in charge. With the purchase of KCG, Young Poong has now become a mega player with annul output expected to exceed $800 million in 2005.

The growth rates of the top three flex makers are phenomenal, as seen in TABLE 3.

The most remarkable aspect of this flex history is the growth through the turbulent recessionary period of 2001 to 2003. In seven years, the growth of these three flex makers was 680%!

KCG planned to build a multilayer board production plant in Tianjin, China. However, the growth and demand for flex was so great that the company decided to change the original plan and convert the plant to produce flex instead. But a provision to produce multilayer boards is still preserved, most likely for rigid-flex.

BH Flex decided to form a joint venture (minority share) with China's TCL to produce flex in Huizhou, China. In the beginning, the JV will be engaged only in the back-end processes of flex manufacturing, but it intends to be engaged in full operation from front-end to back-end processes in the future.

Traditionally, the flex sector has depended on imported flexible copper-clad laminate (FCCL). As flex growth has exploded and cost pressure from customers has mounted, several material makers are now engaged in FCCL business. Recently, it was reported that Han Wha L&C, Toray Saehan and Saehan Micronics joined LG Chemical and Doosan Electro-Materials in the manufacture of FCCL. They expect to capture about 20% of the Korean FCCL market.

HDI Microvia Boards

HDI microvia board production in Korea has been just as explosive as flex in the last three years. It is estimated that 85 to 90% of HDI microvia boards produced in Korea are used by Korea's cell phone sector. It is estimated that Samsung Electronics, LG Electronics, Pantech-Curitel, Motorola and Nokia subcontractors and a few other smaller manufacturers produced about 180 million cell phones in 2004. For a small country having a population of only 45 million, this is a huge number compared to the 240 million cell phones made in China, with a population of 1.5 billion (150 million people are said to be unaccounted for because they are migrant laborers not counted in Chinese statistics).

HDI microvia production was also huge in proportion. Korean HDI microvia board makers seem to have made about 250 to 255 million pieces of cell phone boards using HDI technologies. SEMCO is reported to have produced 110 million pieces. DMC produced 65 million pieces and DDG about 50 million pieces. KCG, PTS, Accuris, DAP, etc., made up the difference. This figure is almost comparable to the total number of cell phone boards (about 290 million pieces) made by the top four Taiwan makers--Compeq, Unimicron, Unitech and Wus in Taiwan and China.

Of its 45 million people, Korea is said to have 28 to 30 million cell phone subscribers, or, 60% of its population. Like Japan, with 83 million subscribers out of 127 million population (some are duplicate subscribers because they own multiple handsets), the Korean cell phone market is practically saturated; like Japan, 90% of cell phones sold in Korea are said to be replacements. Naturally, the bulk of Korean-made cell phones is exported, flooding the world market. This is quite visible in the U.S.

The latest count of laser drilling machines owned and operated in Korea is about 320 units. SEMCO is the largest owner with about 120 machines estimated. DMC owns more than 70 units; DDG has more than 40 units. There are a few laser drilling service companies in Korea.

The value of HDI microvia boards used in Korean cell phones is estimated to be about $700 million. Simply dividing this by the total number of cell phone boards, we obtain $2.75 apiece. This is the average of 1+4+1, 1+6+1 and 2+4+2 boards. It's true that 2+4+2 boards sell for more than $2.75, but the 1+4+1 boards are less (in China, less than $2 for 1+4+1). Flip-phones normally use two main boards and three to four flex boards. Each cell phone consumes about $7-$8 worth of PCBs, both rigid and flex. Thus, the total value of the PCBs used by Korea's cell phone industry may be calculated by multiplying 180 million by $7.50, for a total of $1.35 billion for rigid and flex. This is 36% of the $3.7 billion total 2004 production in Korea. Add to this the BGAs and CSPs used for cell phones. If this deduction proves to be correct, nearly 40% of total production (rigid, flex and IC substrate) in Korea is used by the cell phone industry. Of course some are exported, but it can be understood that the cell phone industry is a big driver in the Korean PCB industry.

More than 90% of laser drilling machines used in Korea are imported, mainly from Japan. However, there is a native laser drilling machine maker, EO Technics, which buys laser generators from Coherent Inc. Lasers are not new to EOT, one of the largest manufacturers of semiconductor marking systems in the world. SEMCO is the largest user of EOT machines.

DMC has a unique HDI microvia technology. About three years ago, it licensed Neo Manhattan Bump Interconnect technology (NMBI) from the Japanese company North Corp. NMBI is very much like Toshiba's B2it technology--the only major difference between NMBI and B2it is the way bumps are formed on copper foil. In the case of B2it, bumps are formed by screening silver paste through aluminum stencil--three to four screening steps are necessary to form "equal height" bumps to ensure reliable interconnection between bumps and copper foil. In NMBI, bumps are formed by etching special three-layer copper foil (Cu-Ni-Cu). The bump side of copper is normally 180 [micro]m. The Ni layer is 10-12 [micro]m and the bottom copper for conductor is 18 [micro]m. The bump side copper is etched by Cu[Cl.sub.2], from 180 [micro]m down to 40 to 50 [micro]m for speed and economy. Then the rest is etched in alkaline etchant because Cu[Cl.sub.2] etches out nickel. Therefore, NMBI etching lines must be configured to handle both acid and alkaline etchants in one line. Special three-layer copper foil material is rather expensive. The manufacturers, Toyo Metal Sheet and Nippon Denkai, both of Japan, indicate that the cost is about $30 to $40/[m.sup.2]. The cost of three-layer material is quite volume-sensitive.

In order to economize the process, DMC developed an alternative process of forming bumps by plating. The basic idea was developed by Daiwa Denshi of Japan. While Daiwa Denshi's process first forms a "base" by etching on FR-4 laminate, the DMC process forms copper bumps directly on copper foil.

"Bumped" copper foil is covered by glass pre-preg and the temperature is raised to about 100[degrees]C, softening the pre-preg for easier penetration by the bumps in the subsequent lamination process. The newly developed DMC process is known as LX-Bump technology (FIGURE 1). DMC makes some cell phone boards using this LX-Bump technology, but it seems that they are made with a combination of LX-Bump and conventional laser drilling, particularly when the layer count is higher. For simple double-sided CSP type boards, only one layer of bumped copper foil is needed. So, such boards are based 100% on LX-Bump technology.

[FIGURE 1 OMITTED]

In Japan, B2it technology is used to make HDI microvia boards for various applications. Clover Electronics is the largest maker of B2it boards, but almost all of the boards made by Clover Electronics are so-called "B2it-Laser" boards. When constrained by plating capacity, B2it, ALIVH, NMBI and LX-Bump technologies are all feasible for certain applications from both technology and economy standpoints.

In Japan, Sony Chemical, Nippon Mektron and Fujikura have NMBI licenses, but they are all quiet. Unimicron of Taiwan also took a license for NMBI, but its status is unknown at the time of this writing.

It is interesting that Korea's LGE/DMC is the only commercial maker of NMBI-based HDI microvia boards today. Its capacity now stands at 13,000 [m.sup.2] per month, soon to be increased to 20,000 [m.sup.2]. In Japan, ALIVH production volume is about 40,000 [m.sup.2] per month and B2it is about 10,000 [m.sup.2] currently. Matsushita Electronic Components inaugurated ALIVH production at the beginning of April in Taiwan with a monthly capacity of 5,000 [m.sup.2].

Other Areas

Samsung Semiconductor and Hynix made 46% of semiconductor memory devices in the world, according to IDC. Naturally, Korea is one of the largest memory card makers. As a result, memory cards, which Korea calls "memory modules," are an important part of the Korean PCB industry. Memory module circuit boards range from simple four-layer structures to upward of 12 layers, with six layers the average.

Samsung and LG-Philips are pushing large-format LCD displays for future flat-panel TVs. LCD driver cards are also main ingredients in the Korean PCB industry. Whatever happens in Japan happens in Korea; if one follows what is going on in Japan, one can easily imagine what is going to happen in Korea, LCD driver cards included. These two countries are fierce competitors in consumer electronics. The moment after a Japanese camera phone maker comes up with a 2 million-pixel camera phone, Samsung announced a new camera phone with 3 million pixels. As soon as it developed that first model, Samsung announced a 5 million-pixel camera phone. Being of Japanese origin and having a Korean daughter-in-law, there is always competitive atmosphere in the author's home during family gatherings. Korean slogan has been "catch up Japan and overtake Japan." In many areas, they seem to have succeeded as witnessed by the successful implementation of NMBI technology.

The Korean PCB industry is becoming more and more self-supporting from the viewpoint of equipment and materials as shown in TABLE 4 and FIGURE 2, compiled by KPCA.

One disadvantage facing Korean equipment and material makers is that it's difficult for them to penetrate China, the largest market, while their Taiwanese counterparts are already well established there. However, there are a few in Korea that have been doing well overseas, such as dry film maker Kolon and laminate makers Doosan Electro-Materials and LG Chemical.

A thousand-mile journey starts with one mile. There may be a lot of one-milers in Korea from the current viewpoint of international business. Some of them may walk thousands of miles in the future.

TABLE 1. Korean PCB production in 2004

                   2003   2004   GROWTH (%)

Samsung             638    850      33.2
Daeduck             421    545      29.5
KCG                 385    528      37.1
LG                  330    410      24.2
Young Poon *        124    220      77.4
Isu/Petasys         135    152      12.6
SI Flex *           112    143      27.7
Simmtech             85    141      65.9
Cosmotech            67     95      41.8
Sanyang *            38     76     100.0
Sawkuang             60     76      26.7
Accuris              31     53      71.0
Q & Tech             30     47      56.7
New Flex *           29     38      31.0
Orientech            20     38      90.0
BH Flex *            28     35      25.0
Hyonwoo              19     29      47.4
Kiju Industry        20     29      40.0
MC Tech *            23     28      21.7
Sansin Circuit *     21     27      28.6
Top 20 Total       2616   3560      36.1

                   OVERSEAS   TOTAL '04

Samsung                          850
Daeduck               40         585
KCG                   21         549
LG                               410
Young Poon *                     220
Isu/Petasys           7          152
SI Flex *                        143
Simmtech                         141
Cosmotech             15          95
Sanyang *                         76
Sawkuang                          76
Accuris                           53
Q & Tech                          47
New Flex *                        38
Orientech                         38
BH Flex *                         35
Hyonwoo                           29
Kiju Industry                     29
MC Tech *                         28
Sansin Circuit *                  27
Top 20 Total          83        3621

Asterisked (*) makers are primarily flexible circuit board
(flex) makers. Flex production values include the value of
assembled boards.

TABLE 2. Korean PCB production in 2004

SSB    DSB    MLB    HDI    IC SUB   FLEX   GRAND TOTAL

$270   $320   $850   $940    $450    $845     $3,675

1) SSB means single-sided boards, DSB means double-sided boards,
HDI means HDI microvia boards, and IC sub means IC substrates.
2) SSB includes silver-paste screened double-sided board made of
FR-1, CEM-1,3. 3) DSB is composed primarily of FR-4, but also
includes a small amount of CEM-3. 4) 90% of HDI is for cell phones.
5) Of the $450 million in IC substrates, about $100 million have
microvias. 6) Flex includes about $105 million in rigid-flex boards.

Source: N.T. Information Ltd.

TABLE 3. The production history of top three flex makers in Korea

              1997   1998   1999   2000   2001   2002   2003   2004

Interflex      2       15     33     46     61    109    200    314
Young Poong    4       28     29     38     53    102    124    220
Slflex         4       18     26     36     44     72    112    143
Top 3 Total    10      61     88    120    158    283    436    677

Source: N.T. Information Ltd.

TABLE 4. Korea's PCB industry for 2004

               2004    2005 (E)   GROWING RATE

PCB            3,850    4,760         24%
Material         950    1,090         15%
Equipment        270      350         30%
Chemical         230      300         30%
Sub-contract     430      500         25%
Total          5,700    7,000         23%

Courtesy of KPCA

FIGURE 2. Korea's market share for 2004 (courtesy of KPCA).

PCB manufacturing   67%
         Material   17%
     Sub-contract    7%
        Equipment    5%
         Chemical    4%

Note: Table made from pie chart.

DR. HAYAO NAKAHARA is president of N.T. Information (Huntington, NY) and consulting editor to PCD&M. He can be reached at [e-mail].