South Korea's leading private equity firms are eyeing a controlling stake in semiconductor wafer producer SK Siltron, which has been put on the market by energy-to-chip conglomerate SK Group as part of an all-out restructuring drive.

SK Inc., the group’s holding company, has reportedly expressed interest in selling its 70.6 percent stake in SK Siltron to optimize its business portfolio and address inefficiencies and financial strain.

With the wafer producer’s valuation estimated at around 5 trillion won ($3.5 billion), the deal is likely to be worth 3-4 trillion won.

SK Siltron is Korea's sole dedicated producer of semiconductor wafers, a key material in chip manufacturing. It ranks third globally in market share for 12-inch silicon wafers. SK Group acquired the then-named LG Siltron in 2017 at a price of 790 billion won.

The wafer producer is considered a cash cow for SK Group. It reported revenue of 2.12 trillion won in 2024, more than double its revenue of 933 billion won in 2017 at the time SK acquired it. Its operating profit jumped from 132 billion won to 315 billion won in 2024.

SK Siltron has a solid partnership with Korean tech giants. Some 50 percent of SK Siltron's revenue comes from Samsung Electronics and SK hynix, according to credit rating agency Korea Investors Service. It accounts for 30 percent and 45 percent of wafer purchases made by Samsung Electronics and SK hynix, respectively.

"SK Siltron is a semiconductor material producer, not an equipment manufacturer, so it is less dependent on the industry cycle,” said an official from a local private equity firm.

“For equipment manufacturers, the purchase cycle is usually longer, as customers will use the equipment for a substantial time. But materials are constantly used up. That’s what makes SK Siltron an appealing choice for mergers and acquisitions.”

Though SK Group has not officially announced the sale of SK Siltron or confirmed its details, industry sources expect SK Group Chair Chey Tae-won will hold on to his 29.4 percent stake in SK Siltron.

Though buyout firms typically seek to acquire full control of a company, Chey's ownership makes the deal even more attractive because the wafer producer will continue to closely cooperate with the chip giant SK hynix.

Hahn & Co. is considered a strong candidate for the deal. Having maintained a close relationship with SK Group, the private equity house has signed multiple deals with the chip-to-energy conglomerate in recent years, spanning across SK Shipping, SK D&D, SK Encar, SK Eco Prime and SKC’s industrial film business.

Given that Hahn & Co. has recently acquired a controlling stake in SK Specialty, which produces special gases used in semiconductors, the firm is expected to purchase the controlling stake in SK Siltron to optimize market position and create synergy.

Other big-name private equity firms, such as MBK Partners, IMM PE and Stic Investment, are also reportedly showing interest in the deal, engaging in talks with SK Group.

Heavy industry titan Doosan Group was rumored to have taken interest in the deal, as part of the conglomerate’s drive to secure future growth drivers, but the group denied the claim, underlining in a regulatory filing on Thursday that the company is not looking into the deal.

Industry sources suggest IMM PE and Stic Investment may team up, as the firms have less dry powder than other contenders such as Hahn & Co. and MBK Partners.

By Im Eun-byel (silverstar@heraldcorp.com)