A World Class Special Gas Supplier

The KOSDAQ opened in July 1996 to support smaller firms with high growth potential. However, dreams of one-hit success, speculation, and entrepreneurs with moral hazards have degraded the trust in the KOSDAQ. But there are still many solid companies with a hopeful future on the market.

With the beginning of the new year, the economy department of the Dong-A Ilbo and the Korea Exchange will select and run an article every Wednesday introducing KOSDAQ companies with a bright future. We hope that these companies, unafraid of challenges, will help revitalize the KOSDAQ market.

On December 27, three cement mixers busily went back and forth along a peaceful ginseng field in Sangjul-dong in Yeongju, North Gyeongsang Province. A manufacturer of special gas for semiconductors, Sodiff Advanced Materials, whose headquarters is located here, has plans to expand its factory into the largest in the world by June. Sodiff has invested 40 billion won, over half of its revenue (63 billion won), last year in expanding their factory. This is not surprising. The company has been investing an average of 78% of revenues during the past five years in facilities. Their goal is to become the top special gas manufacturer in the world.

Changing routes for growth-

Sodiff Advanced Materials, established in 1982, was a manufacturer of abrasives for CRTs just five years ago. In the 1990s, Chinese companies started catching up and the CRT market was dying out, and Sodiff sought new paths.

CEO Ha Young-hwan said, “We thought with abrasives, we would not be able to survive for more than a decade so we looked for new businesses. It was lucky for us that we were able to learn of special gases for semiconductors at an early date while we were supplying electronics companies.”

Sodiff started developing NF3, which is a special gas used to eliminate remaining gases not needed in semiconductor processing. By 2001, the company owned its own small factory with an annual production of 100 tons. Ninety two percent of their 2001 revenues were from abrasives, but specialty gases have grown continuously and accounted for 93% of total revenues in 2006.

Dreaming of becoming first –

Behind such success is the bold investment Sodiff has made. Sodiff completed a 600-ton capacity factory in 2005 and started construction on a 1600-ton factory last April. And in June, when its 800-ton factory is completed, the firm’s capacity will exceed that of the largest factory in the world, owned by Air Products of the United States (1500 tons).

Heightened competition has dragged down NF3 prices from 400 million won per ton to 80 million won per ton in five years, but Sodiff’s price competitiveness has maintained its operating profits at around 25%.

Mr. Ha said, “Special gases are a process industry, so 30% of the cost accounts for depreciation of the facilities. But we can build our factories for less than half of what our competitors pay.” He boasted of Sodiff’s high quality products, with NF3 purity at an average of 99.99%.

Sodiff supplies 25% of NF3 that Korean semiconductor companies need annually. Sodiff also supplies 16% of the world’s demand.

Preparing for high growth-

Sodiff is accelerating the construction of SiH4 factory that started last June. SiH4 is a special gas used to create a screen on the semiconductor wafer.

With Air Products constructing a factory in Korea, NF3 competition is becoming fiercer. Company officials said “SiH4 is an area that needs high technology. We expect that this area will be our cash cow.”

Mr. Ha said, “We suggested co-managing with DC Chemical Company in 2005 to overcome our limits as an SME. It is our goal to become the number one company in the special gases market by cooperating with large corporations.”

larosa@donga.com