Anam Group

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Anam Group

Anam Industrial Co., Ltd.
280-8 Songsu 2-ga
Sungdong-gu
Seoul
Korea
+ 822-460-5114
Fax: +822-460-5780
Web Site: http://www.anamic.co.kr

Amkor Electronics, Inc.
1345 Enterprise Drive
West Chester, Pennsylvania 19380
U.S.A.
(610) 431-9600
Fax: (610) 431-5881
Web Site: http://www.amkor.com

Public Company
Incorporated: 1956
Employees: 8,169
Sales: KW 1.3 trillion (1997 est. for Anam Industrial only)
SICs: 3663 Radio & TV Communications Equipment; 3674 Semiconductors & Related Devices; 3822 Environmental Controls; 3823 Process Control Instruments; 3651 Household Audio & Video Equipment; 3824 Fluid Meters & Counting Devices; 3543 Current-Carrying Wiring Devices; 3873 Watches, Clocks, Watchcases & Parts; 3651 Household Audio & Video Equipment; 5064 Electrical Appliances, TV & Radios

With an estimated one-third of the global semiconductor assembly market, the Anam Group ranks among South Korea’s largest companies. A family affair, this billion-dollar business comprises two companies, both led by members of the Kim family. The larger company, Anam, handles semiconductor testing and packaging, while its U.S.-based sibling Amkor is in charge of global marketing. Though the companies are for tax purposes legally separate, they operate as exclusive associates and are often considered a group. Amkor (at this writing privately held, but in the process of going public) holds about ten percent of Anam’s publicly traded stock. Anam’s revenues more than doubled from 1993 to 1997 as the company and its affiliates added semiconductor manufacturing to their core testing and packaging services. By that time, both companies were chaired by Kim Joo-Jin (also known as James “Jim” Kim), the son of the founder.

Founded in Late 1960s

Anam was created in the late 1960s by South Korean Kim Hyang-Soo, a self-made bicycle magnate who was looking for a second career. His first had started in 1921, when he left home at the age of 17. Equipped only with an elementary education and a bookkeeping course, Kim proved adept at selecting growth industries in which to participate. According to a 1985 article in Electronic Business, Kim’s first company “dominated 90 percent of the Korean bicycle market in the 1950s.”

Perhaps regretting his own limited education, Kim sent his seven children to some of the world’s best institutions of higher learning. Eldest son Kim Joo-Jin traveled to the University of Pennsylvania in 1955 to pursue a degree in economics at the prestigious Wharton School. Joo-Jin, who later Anglicized his name to James Kim and became a U.S. citizen in 1971, received a bachelor’s degree in 1959 and earned a Ph.D. from Villanova University in 1963. He was teaching at the latter institution when his father came to the United States for a visit in 1967.

It was not just a social call. The elder Kim, who had been operating a labor pool since the early 1960s, was looking for a new business interest. Over his son’s objections, Kim decided to move into semiconductors.

Jim Kim must have been pleasantly surprised when, in 1968, he made his first trip home in well over a decade. He found that instead of entering the cyclical semiconductor manufacturing segment, his father had created South Korea’s first semiconductor packaging and testing operation. Clients sent integrated circuit components to Anam, where they were tested for quality control, packaged into protective housings, retested, and sent back to the manufacturer for installation. The company charged by the second for its services: the average test took four to five seconds and cost 20 cents. Demand for such services was on the rise, for as integrated circuitry (IC) became increasingly complex, the expensive equipment required to test semiconductors faced briefer periods of usefulness before obsolescence. By serving multiple manufacturers, Anam was able to attain efficiencies of scale that OEMs could not achieve in-house.

Anam earned the top spot in the packaging and testing industry through two key strategies: it kept pace with its customers’ technological developments, and it created a marketing operation that promoted its services to the leaders of the IC industry. Anam embraced automation, established high quality control standards, and developed leading-edge technology. An early affiliation with VLSI Technology won Anam the contract to test that company’s application-specific integrated circuits (ASICs) when they came out in the early 1980s. The company developed tape automated bonding (TAB)—a time- and money-saving manufacturing process—in the early 1990s. Anam also devised housings for ever-shrinking cell phones and laptop computers.

Jim Kim returned to the United States and founded Amkor (a contraction of “America” and “Korea”) in 1968 to market his father’s products and services. In pursuit of lower corporate taxes, the younger Kim set up his business as a fee-for-service contractor—albeit with only one client, Anam. Based in Valley Forge, Pennsylvania, Amkor quickly became a key factor in its predecessor’s success, establishing offices in Dallas, Hong Kong, and Tokyo. As Anam president Hwang In-Kil told Electronic Business Today in 1997, “The strength of Anam is Amkor. Because we have Amkor, which has a worldwide sales organization with sales offices everywhere, we can concentrate on developing manufacturing technology. And Amkor can’t exist without Anam, so we depend on each other.”

Group Diversification in the 1970s and 1980s

In 1973 the Kim family created Korea National Electric Co., Ltd., a joint venture with Songha Electric Industry Inc., to manufacture consumer electronics like televisions, VCRs, and audio equipment. This subsidiary took over Songha Electric in 1980 and went public four years later as Anam Electronics. Led by Jim Kim’s sibling, Kim Joo-Chai (also known as Jay Kim), this business brought big-screen TVs to Korean consumers in the mid-1980s, and had diversified into computers, fax machines, and VCRs by the mid-1990s. By that time, Anam Electronics was generating sales of KW 264.5 trillion.

Amkor’s retail subsidiary, Electronics Boutique, Inc., evolved from a sideline launched by Jim Kim’s wife, Agnes, in 1977. That year, she set up a cart in a Pennsylvania mall to sell digital watches manufactured by Anam. When the digital watch fad faded, the U.S. Kims rented mall stores and began selling high-end computer software, PCs, and video games. The chain grew from 55 stores in 1986 to 400 stores in the United States and Canada and was generating about $300 million in annual revenues by the mid-1990s.

Growth through Acquisition in the 1990s

Though Korea’s semiconductor manufacturing industry was hit especially hard by the global price declines of the early and mid-1990s, the Anam Group’s niche in packaging and testing continued to enjoy profitable growth. As president Hwang In-Kil noted in a January 1997 interview with Business Korea, ’Anam has gained world renown for its technology and quality of products. That’s the secret of our continued high growth.” The group boosted its capacity with the $30 million acquisition of Manila-based Advanced Micro Device Inc.’s Philippine plant in 1990. Subsequent capital investments were expected to increase this subsidiary’s assembly capacity to 220 million chips per month, or an annual export volume of nearly $2 billion, by the end of 1998. The group acquired a second Philippine plant, this time from American Microelectronics, Inc., in 1990 as well, and built a third factory there in 1996. Amkor oversaw (and held majority interests in) these operations.

Company Perspectives:

Since our early days, we have recognized the need to remain at the forefront of industry technology. We devoted an entire division to technology enhancing activities, and as consumer technology continues to advance at a rapid pace, we are dedicated to providing the latest technology to meet and exceed the market’s rapidly changing requirements. At Anam, we focus on intimately understanding each customer’s market challenges so that we can discover workable, cost effective solutions. Acting more as a business partner than a supplier, we develop close relationships with every customer, providing each one with dedicated service and top quality products.

While others entrenched, Anam diversified into a new growth niche mid-decade. In 1996 the group licensed processing technology from Texas Instruments and invested $1.2 billion in a new industrial park in Kwangju, Korea, near Seoul. The new plant was set up to custom-manufacture (or fabricate, in industry parlance) non-memory or digital signal processor (DSP) chips used in electronic devices like stereos and camcorders. Anam executives forecast that this segment would enjoy a 30 percent annual growth rate through the turn of the century, and it planned to build massive wafer fabrication facilities to accommodate this demand. Its first facility was the size of two football fields. Texas Instruments agreed to purchase 40 percent of the new plant’s total output of 25,000 8-inch DSPs per month. Amkor/Anam forecast that, when complete in 2001, the Kwangju campus would employ 6,000 people and have the capacity to fabricate 120,000 chips or ten million semiconductor packages each month. Jim Kim told Electronic News that the addition of manufacturing capabilities made Amkor/Anam “one of the first to provide fully integrated manufacturing services under a single umbrella.” In keeping with its time-tested organizational formula, the group set up a separate subsidiary, Amkor Wafer Fabrication Services in Chandler, Arizona, to market its expanded capabilities.

Amkor Technologies was reorganized as a holding company in 1997 in anticipation of a 1998 initial public offering. In 1996 the U.S. arm of the Anam Group had revenues of $1.2 billion and net income of $31.3 million.

In a 1997 interview with Lewis Young of Electronic Business Today, Jim Kim forecast that the global semiconductor packaging market would grow 30 percent to $5.7 billion in 1997. Though he expected his company’s share of that pie to decline from an industry-leading high of 50 percent in 1990 to 15 percent as newcomers entered the fray and integrated circuit manufacturers brought testing and packaging functions in-house, he predicted that Amkor/Anam would continue to enjoy a 25 percent annual sales growth rate.

Principal Subsidiaries

Anam Industrial Co., Ltd.; Anam Electronics Co., Ltd.; Anam Instruments (67.2%); Anam Engineering & Construction Co., Ltd. (49.1%); Anam Semiconductor & Technology Co., Ltd.; Anam Environmental Industry Co., Ltd.; Korea National Electric Co., Ltd.; Amkor/Anam Pilipino (40%).