Samsung, SK hynix at crossroads while TSMC soars

Experts say Korea needs to bolster non-memory sector, nurture IT professionals

By Baek Byung-yeul

Samsung Electronics and SK hynix are facing a bleak outlook in terms of their bread-and-butter memory chip businesses as soaring global inflation, the won's fall against the dollar and the ongoing Russia-Ukraine war have dampened demand for IT products using those chips, according to industry analysts, Monday.

The analysts said Samsung and SK will face even more unfavorable business conditions in 2023, because they are heavily dependent on memory chips that account for only 30 percent of the entire chip market and are severely affected by the global economy.

That outlook contrasts sharply with forecasts for TSMC and other Taiwanese companies, which are focusing on non-memory chip operations such as the foundry business, which are still seeing steady demand despite slow economic conditions. Also, Washington's move to restrict Beijing's development of its chip industry, including a ban on exports of U.S.-made chip equipment to China, has also become a negative factor for Korean chip makers, they added.

"Samsung was able to become No. 1 in semiconductors only because of a memory upswing. Now that the market is in a downturn, then they will likely see a big fall in their ranking," Jim Handy, a U.S.-based chip analyst and general director at chip market research company Objective Analysis, told The Korea Times.

"Most of Samsung's revenues come from commodities such as DRAM and NAND flash, so their revenues swing up and down pretty violently. TSMC and Intel sell differentiated products. The revenues for these don't swing as much as commodities, so their revenues remain relatively stable," he said.

Samsung's leadership in global chip sales was possibly overtaken by TSMC during the third quarter of this year, according to local brokerage houses.

TSMC, which generates profits by manufacturing chips ordered from chip design companies, generated sales of $19.1 billion in the third quarter of this year, up 48 percent year-on-year, while Samsung's semiconductor division is estimated to have achieved between $16.7 billion and $17.4 billion in sales over the same period.

Handy said that these figures explain why Samsung, which is severely shaken by global economic conditions, and other competitors such as Intel, are trying to focus more on the foundry business, as TSMC is doing.

"If Intel falls below TSMC, then that is because TSMC serves a broader market than Intel. Intel focuses on microprocessors (MPUs). TSMC sells a whole lot of everything, including MPUs. This is why Intel is interested in becoming a foundry. They would like to restore their semiconductor market leadership. This is also why Samsung is working to become the world's leading foundry," he said.

Korea's chip jobs should be dream jobs: professor

Experts also warned that Korea is losing its competitiveness in terms of nurturing future talent in the chip industry compared to mighty chip powerhouse countries.

Especially when it comes to comparing Korea with Taiwan, which fosters more than 10,000 chip-related professionals every year, and the U.S., which literally absorbs the world's top researchers, the difference is even more pronounced.

The Taiwanese government began to nurture 10,000 chip professionals every year 15 years ago. Also, they enacted a bill to encourage semiconductor education by increasing the number of students majoring semiconductor-related subjects by 10 percent in 2021. However, Korea's chip companies hire about 10,000 employees every year, and only 1,400 of them majored in semiconductor engineering, according to the Korea Semiconductor Industry Association.

To make the country retain its leading status in the chip industry, they added the government should put more effort into strongly supporting its chip industry by providing more benefits, such as support for research and development expenses, tax cuts and a master plan to foster future employees in the chip business.

To address the manpower shortage issue, the Yoon Suk-yeol administration has set the budget for training semiconductor professionals at 450 billion won ($314 million) in 2023, up 1.5 times from 2022. Also, the government aims to nurture 150,000 chip professionals over the next 10 years by providing support measures, such as helping universities establish semiconductor-specialized schools.

Lee Jong-hwan, a professor at the Department of System Semiconductor Engineering at Sangmyung University pointed out that there is no significant difference in salary between a student who majored in semiconductors and a student who majored in computer software or medicine when they get jobs later.

"The chip industry needs a lot of students with master's or doctoral degrees. These students have to study for a long time to get their degrees, but when they get a job, there is not much difference in salary from those who studied in other IT fields. This is something that needs to be solved to make more young people work in the semiconductor field," he said.

Lee added that various kinds of support measures, such as enhancing research facilities and expanding scholarship programs for chip-majoring students are needed to make them realize that they can shape their careers when they choose to study semiconductor engineering.

"When I was studying in the U.S., I was able to meet a lot of people who value very much the people working for the chip industry. Simulations of semiconductor technology are also important, and universities and research institutes there are very developed," he said.

"In contrast, I've seen a lot of smart students choose to study medicine rather than semiconductor engineering in Korea. If the country intensifies the benefits to students who decide to study chip engineering, more of them will decide to shape their career paths in this field and the number of engineers in the chip sector will naturally increase," he said.