FADU上市披露案二审披露SK海力士砍单与产品竞争力争议

Was the sharp drop in FADU's revenue caused by external factors or internal ones?
That question came to the fore in the second trial over alleged violations of the Capital Markets Act, as FADU and prosecutors clashed over why the company's results fell short of expectations. FADU pointed to external factors, calling it "a sharp volume cut by SK hynix," while prosecutors pointed to internal factors at FADU, saying customers turned away because its products were too expensive and outdated.
Following the first trial, prosecutors again stressed at the second trial that FADU deceived the market by failing to disclose the deterioration in its results caused by the volume reduction, even though it was aware of it before listing.
At the second trial over FADU's alleged Capital Markets Act violations, held on July 23 at the Seoul Southern District Court, arguments continued over why FADU's revenue fell short of forecasts after its 2023 listing.
That day, prosecutors and FADU's legal team questioned an SK hynix employee, identified by the surname Lee, as a witness. Lee was part of SK hynix's procurement team from 2021 to 2023 and handled matters such as price negotiations for solid-state drive (SSD) controllers between SK hynix and FADU.
FADU: SK hynix pushed us into advance production of SSD controllers
FADU's legal team argued that FADU produced SSD controllers in advance based on demand forecasts presented by SK hynix, ahead of SK hynix's purchase orders (POs). It stressed that as the semiconductor market worsened, SK hynix cut its forecasts, leaving FADU to bear the resulting inventory burden.
SK hynix had provided FADU with monthly forecasts. According to FADU's legal team, SK hynix's SSD controller forecast fell from 950,000 units in December 2022 to 350,000 units a month later. FADU had already produced more than the reduced forecast. It absorbed the loss from the excess volume, because forecasts, unlike POs, are not binding.
FADU's legal team argued that this advance production was carried out at SK hynix's request. It said it takes six months to produce SSD controllers and deliver them to a customer, while SK hynix reviews SSD controller orders at intervals of two weeks to a month. The explanation was that products had to be produced in advance to meet SK hynix's schedule.
As supporting evidence, FADU presented an email that Lee had exchanged internally at the time. Lee wrote to the marketing team managing the company's inventory to the effect that "we (SK hynix) had FADU produce the SSD controllers, so let's buy some of the volume."
However, Lee explained that while he did use the phrase "had them produce," he was "not referring to volume to be supplied to SK hynix." At the time, FADU was producing SSD controllers using TSMC production capacity that SK hynix had secured. He argued that the meaning was that FADU could use the allocated production line, not that he encouraged advance production.
SK hynix was also taking losses from the semiconductor market slowdown. "At the time, our (SSD controller) inventory also reached one million units, about one year's worth," Lee said.
Lee also stressed that the SSD controllers FADU produced were general-purpose products. He pointed out that they were products FADU could have sold to existing customers such as Western Digital. FADU's legal team countered that the SSD controllers were optimized for SK hynix SSDs and could not be sold to other customers.
Prosecutors: FADU's SSD controllers cost more than the market, and were also outdated
That day, prosecutors also presented the argument that SK hynix's reduced purchases were not tied to market conditions but stemmed from FADU's products being less competitive in both price and specifications.
According to material obtained by prosecutors, FADU's SSD controllers were priced at $45 to $55. Lee, appearing as a witness, also said that "compared with the unit prices of imported controllers, they were on the expensive side," and that "compared with other controllers, they were at a level below $10." FADU's legal team countered that the unit price was high because these were SSD controllers FADU had designed itself.
FADU's controllers being previous-generation products was also cited as a reason for the failed purchases. At the time, FADU supplied SK hynix with third-generation (Gen3) SSD controllers. In 2023, when forecasts fell sharply, the market was already shifting from Gen3 to Gen5. SK hynix was also bringing Gen5 controllers in-house at Solidigm, then a subsidiary.
Prosecutors again stressed the deliberate non-disclosure of the revenue decline, which they called the core issue of this trial. According to prosecutors, in June 2023 SK hynix notified FADU that there would be no additional orders through the third quarter of 2024 beyond existing ones (about 200,000 SSD controllers). FADU listed in September 2023. That means it had three months to correct its revenue guidance.
FADU, which listed on the KOSDAQ in 2023, saw its revenue after listing fall below the guidance it had submitted before listing. Its annual revenue forecast for 2023 was 118.8 billion won, but actual revenue was just 22.5 billion won.
FADU faces allegations that it failed to sufficiently inform investors even though it knew revenue would plunge due to falling volumes of SSD controllers supplied to customers including SK hynix. Concluding that FADU distorted investors' judgment, prosecutors indicted former co-Chief Executive Officer Lee Ji-hyo (currently president), co-Chief Executive Officer Nam Yi-hyun (currently CEO) and FADU as a corporation for violating the Capital Markets Act.
At the first trial held at the same court last month, prosecutors alleged that FADU inflated its revenue estimate even though it knew that SpaceX, a customer other than SK hynix, had halted orders. They said Lee Ji-hyo, then CEO, was aware of this and internally instructed staff to treat SpaceX revenue as nonexistent.
FADU stressed that it was a reasonable revenue estimate made in line with market conditions, adding that it was in fact set conservatively. It said it presented 118.8 billion won, lower than the 247.3 billion won in revenue forecast by its customers. It also said the SpaceX volume was "temporarily delayed" rather than "halted."