SK Telecom (NYSE:SKM) announced today that SK China has established a KRW 19-billion joint venture called "SKMtek" in partnership with MtekVision, Korea’s leading fables semiconductor company.

Based in Shenzhen, China, the new joint venture marks a milestone for SK China as it enters the rapidly growing system-on-chip (SoC) market sector in China for the first time. Leveraging Korea’s semiconductor design expertise and China’s semiconductor manufacturing experience, SKMtek will provide system-on-chip for mobile devices, including smartphones and tablet PCs, and later expand into solutions and non-telecom semiconductors.

SK China was established in July 2010 through the joint investment of SK Group subsidiaries to ensure the integrated management of SK’s business in China. SK Telecom’s China CIC, which is headed by President Oh Se-Hyun, operates SK China’s ICT business.

SK China and MtekVision will jointly invest to establish SKMtek by transferring semiconductor technology and business infrastructure. The new joint venture will have an initial capital of KRW 19 billion, which will later increase in line with business expansion. SK China and MtekVision will hold a 60% and 40% stake in SKMtek, respectively. SKMtek will be headquartered in Shenzhen’s High-Tech Industrial Park.

Hahm Hee-Hyeok, Senior Vice President and Head of China Platform Business Division of SK China will serve as the first managing director of SKMtek, which will be fully operational as early as March in Shenzhen, Guangdong Province.

SKMtek Managing Director Hahm Hee-Hyeok said, "SKMtek will offer cost-effective, high-performance products by combining Korea’s remarkable semiconductor design technology with China’s strong semiconductor manufacturing base. The company plans to achieve its sales target of KRW 400 billion in 2016, within five years from the establishment of the company.

SKMtek will first focus on system-on-chip for mobile devices, such as smartphones and tablet PCs. From 2013, it aims to expand its business to the overall ICT industry including automobile and electronic appliances as well as cutting-edge convergence business areas, including u-Health and smart grid.

The establishment of SKMtek is expected to bring mutual benefits to SK China and MtekVision as SK China will be able to expand its existing ICT business to further include core solutions for mobile devices like SoC and related software while MtekVision maximizes its semiconductor sales in China by making full use of SK China’s well-established infrastructure and network.

SoC refers to integrating all features – i.e. application, multimedia, game, mobile telecommunications service, etc. - of IT devices like computer and mobile phone into a single integrated circuit.

According to analyst reports, the SoC market, which currently takes up 82% of the total semiconductor market, is projected to reach USD 231.3 billion in 2013. Within the SoC market, SoC for mobile devices (USD 43.9 billion), electronic appliances (USD 53.6 billion) and automobiles (USD 19.2 billion) are growing at a remarkable pace. In 2009, China produced 65% of all IT devices in the world and while it consumed 35% of all semiconductors produced in the world, China’s total semiconductor production met only 17% of its demand. (China’s semiconductor production stood around KRW 3.1 trillion in 2009.)

The SoC market is constantly moving towards integrating more features into smaller, high-performance chips and is experiencing rapid growth due to the emergence of new ICT trends and converged services. Experts believe that SoC business can offer huge opportunities for newcomers that have differentiated technology since planning, marketing and design are most important when it comes to SoC.

SK has been designing SoC products including integrated chip for mobile TV, CAS (Conditional Access System), Wi-Fi/GPS integrated chip and improved Zigbee chip, which were later produced through external suppliers. Korean fabless semiconductor companies like MtekVision are highly recognized for their world-class competency to design communication circuit, which is regarded as one to two years ahead of their Chinese counterparts, but their growth has been limited due to the lack of capital, product planning and overseas marketing capabilities.

SKMtek will be able to make a successful entry into the Chinese market, where the manufacturing industry is showing stellar growth, by combining SK’s R&D experience and mid-to long-term service planning capability with Mtekvision’s accumulated expertise in semiconductor chip design. Furthermore, based on its success in China, the joint venture company will expand its business to other global markets, thereby positioning itself as a world-class SoC company. 

Lee Sung-Min, President of MtekVision said, "Forming a joint venture with SK China, which has extensive experience and knowhow in the Chinese market, will provide a huge growth opportunity for MtekVision. The company plans to offer integrated solutions for mobile phones in the Chinese market by applying diverse SoC products that are being developed or will be developed including communication baseband chip and NFC made by MTH, its subsidiary, let alone its own products like AP (application processor) and ISP (image signal processor) for mobile phones."

Hahm Hee-Hyeok, Managing Director of SKMtek said, "We aim to make the best use of our deep experience gained in diverse areas in the Korean market , including, communication service, media business and platform business, to develop and offer competitive SoC products and mobile solutions in the Chinese SoC market. The establishment of SKMtek will offer great opportunities for both SK China and MtekVision as the two parties collaborate in the Chinese market, which is driving the global manufacturing industry."