Korea Zinc’s Hostile Takeover by MBK Partners Threatens Global Semiconductor Supply Chain

A hostile takeover bid by MBK Partners and Young Poong for Korea Zinc (KRX:010130) has raised significant concerns across the tech industry, especially given its crucial role in supplying semiconductor sulfuric acid to global giants like Samsung Electronics and SK Hynix. As the world increasingly relies on advanced chips for everything from smartphones to AI-driven technologies, any disruption in the supply chain could ripple across industries.

The Core of Chip Manufacturing

Korea Zinc supplies 240,000 tons of semiconductor-grade sulfuric acid annually, which is essential for cleaning semiconductor wafers. Given that Samsung and SK Hynix use over 98% of this material for their chip production processes, a disruption could severely affect the semiconductor industry. The sulfuric acid used must be extremely pure, demanding specialized production processes and rigorous quality control. Companies like Korea Zinc have advanced contamination control technologies that ensure they meet the high standards required for chip production.

The stakes are particularly high because importing this material is not a viable solution. South Korea relies almost entirely on domestic production, with Korea Zinc and LS MnM Inc. as the only suppliers. With Korea Zinc planning to expand its production capacity to 320,000 tons by 2026 and aiming for 500,000 tons annually in the long term, maintaining stable control of the company is critical to supporting future demand.

A Strategic Industry Under Siege

The ongoing takeover battle is being closely watched by both Samsung and SK Hynix, as the consequences could reach far beyond short-term profitability. Private equity takeovers, especially ones focused on quick financial returns, could undermine long-term investments that are vital for increasing production capacity and maintaining the quality needed for the semiconductor sector.

This is particularly concerning given South Korea’s plans for massive semiconductor fab expansions. SK Hynix is investing KRW 122 trillion in new fabs in Yongin, set to be operational by 2027, and Samsung is preparing a KRW 360 trillion project in Namsa-myeon, which will start construction in 2031. These projects will likely drive domestic demand for semiconductor sulfuric acid beyond 1 million tons annually. If the hostile takeover proceeds, Korea Zinc’s ability to scale up production to meet this demand could be compromised.

The Geopolitical Angle: A Global Supply Chain at Risk

The broader geopolitical implications of the Korea Zinc takeover are just as important. Industry insiders worry that if Korea Zinc were sold to Chinese interests, it could shift its focus to supplying Chinese chip manufacturers. This would disrupt the critical flow of sulfuric acid to South Korean companies, which in turn could affect the supply chain for the U.S., a key player in the global AI and semiconductor competition.

As semiconductors remain South Korea’s largest export, with growing importance in global technology markets, any instability in the Korea Zinc takeover could undermine not only the supply chain but also South Korea’s position as a semiconductor powerhouse. Moreover, the potential for disruptions in sulfuric acid supply extends beyond South Korea, with global manufacturers depending on stable and secure access to this critical material. The highly purified chemical is crucial for wafer cleaning, a critical step in semiconductor manufacturing.

While Korea Zinc and LS MnM Inc. dominate the domestic market, the ripple effects of a shortage would reach global manufacturers. Here’s why:

Global Reliance on Korean Semiconductor Production

South Korea is home to two of the world’s largest chipmakers, Samsung Electronics and SK Hynix, which together account for about 70% of the global market for DRAM chips and over 40% for NAND flash memory. These chips are integral components in various electronic devices such as smartphones, computers, and data centers. If the supply of sulfuric acid—a key material in wafer cleaning—were disrupted, it could lead to a bottleneck in chip production, affecting the availability of these essential components in the global market.

Additionally, global tech giants like Apple, Google, and Microsoft depend on a steady supply of advanced chips for their products and services. A sulfuric acid shortage could increase chip production costs, delay product launches, and reduce the supply of critical components for these companies.

Limited Alternatives and High Barriers for Imports

Semiconductor-grade sulfuric acid requires an extremely high level of purity, which is challenging to achieve. Only a few companies worldwide have the expertise and infrastructure to produce sulfuric acid that meets the rigorous quality standards of semiconductor manufacturers. The precision involved in the production process and contamination controls means that importing from alternative suppliers carries risks. Foreign sulfuric acid could introduce impurities, leading to yield losses in chip production. For this reason, companies like Samsung and SK Hynix rely heavily on local suppliers like Korea Zinc, as importing alternatives often doesn’t meet the stringent quality requirements needed for semiconductor manufacturing.

China’s Growing Influence and Concerns Over Acquisitions

Should Korea Zinc fall into Chinese hands through a takeover or acquisition, this could shift the priority of sulfuric acid supply away from South Korean companies toward Chinese manufacturers.

The current takeover bid led by MBK Partners and Young Poong raises the possibility that Korea Zinc could be acquired by private equity firms. Private equity firms often have short-term financial objectives, such as increasing a company’s value and then selling it for profit. If MBK Partners or another firm takes control of Korea Zinc, there is a possibility that they could eventually sell the company to a higher bidder, including a Chinese entity.

China has a history of acquiring foreign companies to gain access to strategic resources and technology. In the past, Chinese companies have acquired stakes in or taken over foreign companies in industries like energy, mining, and technology. For example, Tsinghua Unigroup, a state-backed Chinese firm, has pursued acquisitions of semiconductor-related companies like Micron Technology, SK Hynix and many more to bolster China’s domestic chip production capabilities.

The actual concern is that the hostile takeover by private equity firms like MBK Partners could eventually lead to a sale to Chinese interests, which would have broader geopolitical and supply chain implications for the semiconductor industry.