Chip foundry DB HiTek pulls the plug on fabless division spinoff plan

DB HiTek Co. has pulled the plug on the possible spinoff of its fabless division, named the brand business department. The decision comes on the back of stronger-than-expected opposition from individual shareholders. 

The company, one of South Korea’s leading foundry chipmakers, announced the decision on Monday. 

For decades, DB HiTek has been deliberating over a plan to keep the foundry department within the company but spin off the brand business department into a wholly owned subsidiary.

The strategic move to not proceed with that plan is aimed at strengthening its fabless business as a specialized sector while expanding its main foundry business.

Even though DB HiTek is primarily a foundry business, meaning that it receives orders for semiconductor manufacturing, the company has designed general purpose products such as Display Driver Integrated Circuits (DDICs) in-house through the brand business department.

“The chipmaker could take the opportunity to build trust with clients if it spins off the fabless department, amid record-high performance with the 8-inch foundry semiconductor fab,” an industry insider familiar with the development said. 

The company is building a next-generation metal-oxide-semiconductor field-effect transistor (MOSFET) production line at its 8-inch semiconductor fab in North Chungcheong Province.

But individual shareholders thought otherwise, worried that the spinoff could weaken the value of the existing company's shares. 

DB HiTek shares plunged when news of the company's deliberations over the spinoff was first reported.

The falling share prices mobilized the minority shareholders to launch a campaign to stop the spinoff. 

The alliance set up a non-profit corporation and requested DB HiTek to allow the viewing and photocopying of the shareholder roaster.

“There are continued concerns about shareholder value being damaged and the legislative procedure for protecting shareholder rights is not in place yet,” said a DB HiTek employee, explaining why the spinoff plan was called off. 

Write to Sung-Soo Bae at baebae@hankyung.com
Jee Abbey Lee edited this article.