Korea highly dependent on foreign chip equipment: KITA

Samsung Electronics' Pyeongtaek Semiconductor plant in Gyeonggi Province / Courtesy of Samsung Electronics

By Kim Hyun-bin

Korea's dependence on semiconductor equipment from the U.S., Japan and the Netherlands has reached 77.5 percent, sparking worries that the high level of dependence could be geopolitically and diplomatically risky in the future. Some experts are advising Korea to join the Chip 4 Alliance to ensure a stable supply of semiconductor equipment, according to a Korea International Trade Association (KITA) report, Thursday.

The KITA released a report titled, “Recent Semiconductor Equipment Trade Trends and Implications,” and it states that global semiconductor equipment trade increased 2.4 percent year-on-year in 2018 due to a surge in global semiconductor equipment investment, recording a record high of $101.2 billion. The top three export countries for semiconductor equipment were Japan ($31.2 billion), the U.S. ($28.4 billion), and the Netherlands ($20.1 billion).

In the global semiconductor equipment market, five major semiconductor equipment companies, including Applied Materials (U.S.), Lam Research (U.S.), KLA (U.S.), Tokyo Electron (Japan) and ASML (Netherlands), account for 79.5 percent of the total.

Korea is highly dependent on semiconductor equipment supplied by these companies. As of last year, China ($38.6 billion), Taiwan ($29.8 billion), and Korea ($25 billion) were ranked as the top three importers of semiconductor equipment, while Korea was more dependent on foreign equipment imports than Taiwan and China. As of last year, Korea's dependence on equipment imported from the U.S, Japan and the Netherlands reached 77.5 percent, which is higher than Taiwan (70.6 percent) and China (56.2 percent).

The report pointed out that Korea's semiconductor equipment imports are likely to increase further in the future. China's import of semiconductor equipment has started to decline due to U.S. sanctions on the export of advanced semiconductor equipment, which is likely to result in a spike in domestic imports in the near future.

The KITA added that Korea's semiconductor supply chain structure is vulnerable to diplomatic and geopolitical risks because of its heavy dependence on overseas semiconductor equipment. The fact that Korea's self-sufficiency in domestic semiconductor equipment is only 20 percent is of concern.

The report predicted that it will be difficult to localize the production of semiconductor equipment or diversify the countries from which the equipment can be imported right away due to the characteristics of the market, and emphasized that it is necessary to take part in the Chip 4 Alliance in order to increase profits through a stable supply of semiconductor equipment.

"As China's semiconductor boom has been on a decline due to the U.S.' export restrictions on semiconductor equipment, we have an opportunity to get some kind of reflective benefits,” a KITA official said. “We have to widen the gap with China and strengthen the domestic semiconductor industry base.”