A survey by the Korea Chamber of Commerce and Industry (KCCI) showed industrial experts believe that the country's semiconductor industry is in crisis. According to the survey of 30 experts, 76.7 percent of the respondents said the chipmaking industry is “under a state of crisis,” and 58.6 percent of them predicted that the gloomy outlook will continue beyond 2024. Only one respondent said the industry is “not in a state of crisis.”
There are many reasons to take the survey seriously. Semiconductor exports fell by 7.8 percent year-on-year in August, ending the 26-month upward march. This certainly made 43.4 percent of the respondents consider the situation to be “the worst in 10 years.” The semiconductor inventory surged by 80 percent in July from a year earlier.
Samsung Electronics, a leading global manufacturer of memory chips, posted a record-high level of inventory worth 52 trillion won ($37.6 billion), followed by SK hynix with 12 trillion won. Demand for semiconductors is declining worldwide amid the global economic slowdown. Prices of DRAM chips and NAND flash memory chips, South Korea's key export items, are on the steady decline. Concerns are growing that the semiconductor boom, which contributed to the country's economic recovery from the COVID-19 shock, appears to have come to an end.
More worrisome is that the local chipmaking industry is too slow in keeping up with the rapidly changing global environment. China is making strenuous efforts to catch up with Korea in the semiconductor sector. Last week, Apple said it has decided to use memory chips from China's Yangtze Memory Technologies Corp. in future iPhone models. The decision should serve as a wakeup call to local chipmakers struggling to maintain their global market share and boost their technological competitiveness.
The United States is also going all out to revive its semiconductor industry. It legislated the CHIPS and Science Act which calls for investments totaling $52.7 billion to bring chip technology, manufacturing and innovation to America. President Joe Biden has been striving to attract huge investments from global chipmaking giants such as Samsung Electronics and Taiwan Semiconductor Manufacturing Company (TSMC) to create America's own semiconductor supply chain. The Biden administration is also trying to form a semiconductor alliance, also known as the Chip 4, with South Korea, Taiwan and Japan.
The Yoon Suk-yeol administration is, of course, well aware that a global semiconductor war has already begun. It has set up a special committee tasked with improving the semiconductor industry's competitiveness. The government has also announced a set of support packages that call for a 340 trillion won investment in the chipmaking sector in the next five years. Besides, it has promised to expand tax credit and lift regulations to create a more favorable business environment for semiconductor firms.
For this, the government and the ruling People Power Party (PPP) have presented a semiconductor support bill to the National Assembly. Regrettably, however, lawmakers have yet to begin deliberating on the bill. So the bill has no chance of getting approval during the ongoing regular plenary Assembly session. We urge lawmakers of the PPP and the main opposition Democratic Party of Korea (DPK) to pass the bill sooner rather than later in order to help the semiconductor industry overcome the crisis situation and survive in the intensifying global competition.