ED Support for chip-making industry

Korea should shift to non-memory semiconductors

Since the U.S.-China trade conflict began to escalate, Korea has been suffering from the largest setback in the shipment of semiconductors among major exporters, according to a report released by the Federation of Korean Industries (FKI). More specifically, since the United States regulated the supply of semiconductors to China in 2018, the U.S. market shares of Taiwan and Japan have increased by 4.4 percentage points and 1.8 percentage points as of 2021. However, that of Korea decreased by 5.5 percentage points during the period.

China's semiconductor imports grew 37.2 percent last year compared to 2018, a year before Washington began to regulate the supply to Beijing. China's imports of computer chips from Taiwan and Japan jumped 57.4 percent and 34.8 percent. In contrast, imports from Korea rose only 6.5 percent. China's imports of Korean memory chips plunged 13.7 percent last year from 2018, resulting from Huawei's suspension of purchasing Korean memory chips due to the U.S. regulation and their consequent price drops.

Against this backdrop, industry experts point out that the government should actively support semiconductor companies as international competition intensifies to maintain a “super-gap” with foreign competitors. According to another FKI survey on the proportion of government subsidies among the revenues of 21 global semiconductor makers from 2014 to 2018, Chinese companies took the top three posts ― SMIC (6.6 percent), Hua Hong (5 percent), and Tsinghua Unigroup (4 percent). On the other hand, the corresponding shares were negligible in Korean companies, as shown by Samsung Electronics (0.8 percent) and SK hynix (0.5 percent).

The incoming government plans to promote the non-memory semiconductor industry as a way of supporting the domestic industry to widen gaps with latecomers. The Yoon Suk-yeol administration is expected to make Korea emerge as the world's powerhouse by creating a non-memory semiconductor ecosystem through extensive investments into chip foundries and fabless chip companies. However, experts point out that Korea will have a tough time becoming a global power in the non-memory semiconductor sector using the existing method, calling for a breakthrough. We hope the next government will accomplish this “mission impossible” by helping to create the world's No. 1 non-memory semiconductor ecosystem.