S.Korea's DB HiTek to split off fabless, bulk up foundry business

DB HiTek Co., a leading chipmaker in South Korea, said on March 7 it is set to split off its fabless unit by May 2 to ramp up its foundry business.

DB HiTek has focused on manufacturing display driver integrated circuits (DDICs) for liquid crystal diode (LCD) so far to prevent conflicts of interest with clients, such as tech leakage.

As it splits off the fabless unit, DB HiTek is slated to bulk up DDIC production for organic light-emitting diode (OLED) to boost earnings as well as enter the high-end display market, such as the mini light-emitting diode (LED) segment.

DB HiTek will fully own the fabless unit to prevent a decline in sales. The company said it won’t list the unit on the public market after the split-off to protect minority investors’ interests. The company pledged that if the subsidiary aims for an IPO in the future, it will get DB HiTek investors’ approval to do so at a shareholders' meeting.

The company will also buy back its equities worth 100 billion won ($75.7 million) to increase shareholder value. The investors will vote on the split-off and stock repurchase at the general shareholders' meeting later this month.

DB HiTek considered splitting off the fabless unit last September. It suspended the plan at the time as minority shareholder value could be hurt by separating the business.  

It recently decided to execute the plan as the Korean government implemented the Financial Investment Services and Capital Markets Act last December. Under the law, the shareholders who disagree with the split-off can exercise their rights to ask DB HiTek to buy back shares. 

Write to Sungsu Bae at baebae@hankyung.com

Jihyun Kim edited this article.