Ukrainian neon manufacturer, suspected of collaboration, moves production to South Korea

12 April, 02:24 PM
Semiconductor Precursors from JI Tech (Republic of Korea) (Photo:Videoscreenshot JI Tech)

Semiconductor Precursors from JI Tech (Republic of Korea) (Photo:Videoscreenshot JI Tech)

Ukrainian clear neon manufacturer Cryoin Engineering, which has been accused of supplying gas to Russia's military industry, has launched a joint venture in South Korea. This may mean a transfer of ultra-pure neon production technology from Ukraine to South Korea.

Cryoin Engineering, based out of Odesa, has become one of the founders of the Cryoin Korea company, which will produce inert and rare gases, according to Korean news portal SE Daily and other Korean media outlets, with reference to the company JI Tech – the second partner in this joint venture. JI Tech owns 51% of the venture.

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"The establishment of this joint venture will JI Tech with the opportunity to localize the production of special gases that are necessary for semiconductor processing, and to expand new business," said Ham Seokheon, CEO of JI Tech.

Ultra-pure neon is mainly used in the lasers used by lithographic equipment, an important part of microchip manufacturing processes.

The new company was created the day after Ukraine’s SBU security service accused Cryoin Engineering of cooperation with the Russian military industry – namely, in the supply of neon for tank laser sights and high-precision weapons.

NV Business explains who is behind the venture, and why South Koreans need their own neon production.

JI Tech is a Korean manufacturer of raw materials for the semiconductor industry. Last November, the company's shares were listed on the KOSDAQ index of the Korea Stock Exchange. In March, the price of the JI Tech shares increased from KRW 12,000 ($9.05) to KRW 20,000 ($15,08). There was also a significant increase in the trade volume of JI Tech bonds, which could be related to the new joint venture.

Construction of the new facility, planned out by Cryoin Engineering and JI Tech, is expected to start this year and will last until mid-2024. Cryoin Korea will have a single production site in Korea capable of producing all types of rare gases used in semiconductor processes: xenon, neon and krypton. JI Tech plans to provide a special gas production technology by "making a deal on technology transfer in a contract between the two companies.”

According to Korean media, the Russian-Ukrainian war served as the impetus for the creation of this joint venture, which reduced the supply of ultra-pure gases to semiconductor manufacturers from Korea, mainly Samsung Electronics and SK Hynix.

Notably, at the start of 2023, Korean media outlets reported that another Korean firm – Daeheung CCU – will join this joint venture. This company is a subsidiary of petrochemical company Daeheung Industrial Co. In February 2022, Daeheung CCU announced the creation of a carbon dioxide production plant in the Saemangeum industrial zone. Carbon dioxide is an important component in the technology for the ultra-pure inert gases production. Last November, JI Tech became an investor in Daeheung CCU.

If JI Tech’s plans succeed, then the Korean company may become a comprehensive supplier of raw materials for semiconductor manufacturing.

This is all buttressed by the fact that until February 2022, Ukraine served as one of the world's largest suppliers of ultra-pure inert gases, with three main manufacturers dominating the market: UMG Investments, Ingaz, and Cryoin Engineering.

UMG is a part of oligarch Rinat Akhmetov's SCM group, mainly engaged in the production of gas mixtures based on the capacities of metallurgical enterprises of the Metinvest Group. Purification of these gases was handled by UMG partners.

Ingaz, meanwhile, is located in occupied territory, and the condition of its equipment is unknown. The owners of the Mariupol plant were able to partially resume production partially in another region of Ukraine.

According to the results of an investigation by NV Business in 2022, Cryoin Engineering’s founder is Russian scientist Vitaly Bondarenko. He had personal ownership over the Odesa plant for years, until ownership was transferred to his daughter, Larisa. Following Larisa’s tenure, the company was acquired by Cypriot firm SG Special Gases Trading, ltd. Cryoin Engineering ceased operations at the start of the full-scale Russian invasion, but later resumed its work.

On March 23, the SBU reported that it was searching the premises of Cryoin’s Odesa plant. Its actual owners, according to the SBU, were Russian citizens, who "formally resold [the firms] assets to a Cypriot company and hired a Ukrainian management for oversight."

Only one Ukrainian manufacturer in this field fits this description - Cryoin Engineering.

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NV Business sent a request about the Korean joint venture to Cryoin Engineering and to Larisa Bondarenko, a top manager at the firm. However, NV Business did not receive a response prior to publication.

NV Business discovered that in 2022, Turkey became a major player in the trade of gas mixtures and pure rare gases. From Turkish import and export statistics data, NV Business was able to piece together that Russian gas mixtures were being supplied to Ukraine through transit from Turkey. At that time, LarisaBondarenko refused to comment on the activities of the Odesa-based enter-prise, though Ingaz owner Serhii Vaksman denied that Russian raw materials were being used in gas production.

Meanwhile, Russia has created a program to develop production and export of ultra-pure rare gases – a program directly controlled by Russian dictator Vladimir Putin.

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