Chip semiconductors are the lifeblood of Korea and the core of our industry. Korea s semiconductor industry is the foundation of our economy, accounting for 20 percent of our total exports.
In early June, President Yoon Seok-yeol held an unusual cabinet meeting.
Rather than a meeting, it was more like taking a group of heads of various departments to attend an extracurricular tutoring session on semiconductors.
Lee Jong-ho, minister of Science, Technology, Information and Communication, briefed the cabinet members on his understanding and strategic value of semiconductors and pointed out that Korean companies are lagging behind in system semiconductor technology and are facing a shortage of human resources.
Yin Xiyue carefully studied the hand of a photomask chip, said the beginning of these words.
In fact, many of the participants in the conference had nothing to do with science and technology, including the minister of justice, the minister of education...... After the meeting, Yin Xiyue directly told the people present, everyone should learn chip technology.
All cabinet members should have an understanding of the ecosystem of high-tech industries such as semiconductors. We need to improve our knowledge on our own. Even if we have private teachers, we need to learn more about semiconductors. Yin Xiyue said.
Shortly after the meeting, the South Korean Ministry of Science and Information And Communications Technology announced on June 27 that the south Korean government will spend 1.02 trillion won (about 5.2 billion yuan) on research and development of cutting-edge artificial intelligence (AI) semiconductor technology, It will also expand joint research in PIM (memory processing) semiconductors, next-generation neural network processors (NPU) and system software with leading AI countries. There are also plans to launch large data center projects next year.
Meanwhile, after the 3nm semiconductor plant was inspected by U.S. President Joe Biden, Samsung Electronics Vice Chairman Lee Jae-yong announced a huge investment plan: Samsung will invest 450 trillion won (about 2.37 trillion yuan) in the next five years in chip semiconductor and other fields. That's up more than 30 percent from a year ago.
This means that the most powerful man in Korea (Yoon Seok-yeol) and the richest man in Korea (Lee Jae-yong) will jointly invest 451 trillion won in the chip semiconductor industry and follow Biden's plan to revive the Korean semiconductor industry.
"Biden's first visit to Samsung, the world's largest wafer foundry, shows that the U.S. will never give up on Korea in terms of international security strategy." Yun's remark drew attention. In the following month, the whole of South Korea set off the wind of semiconductor revitalization, organized hundreds of seminars to discuss how to promote the South Korean chip industry.
This is the first time that the nation has focused on chip semiconductor technology.
In addition, the U.S. is planning to form a "Chip4" alliance as early as August this year in order to woo Japan and South Korea and prevent China from developing advanced chip semiconductors.
However, with global supply chain conditions likely to deteriorate in the second half of this year, South Korea's chip semiconductor production and imports face significant supply risks.
Ilkyeong Moon, a professor of industrial engineering at Seoul National University, puts it bluntly: "I think it is very necessary for Korea to have a government-wide unified supply chain control system."
Korea's Semiconductor Industry Is not autonomous
Korea s semiconductor industry is impressive.
According to Gartner's 2021 Global Semiconductor Rankings released in April, South Korea took two of the top three spots, followed by Samsung and SK Hynix, showing the strength of Korean chip companies.
However, separate data shows that South Korea is heavily dependent on imports for chips.
According to the Korea Institute for International Economic Policy, South Korea's semiconductor imports will reach 57.03 billion U.S. dollars in 2021, of which 31.2 percent will come from the Chinese mainland, ranking first, followed by 13.6 percent from Japan. Korea imported $3.02 billion worth of semiconductor equipment from Japan last year.
The growth of local alternatives slowed over the past five years as Mr Lee served time in prison and former President Moon Jae-in failed to win parliamentary support for his chip-related policies, leading to a long dependence on imports for semiconductors led by Samsung.
Why is the Korean chip semiconductor industry so self-reliant? Ti Media App interviewed industry insiders and mainly sorted out the following two points:
First, South Korea's chip industry chain is hampered by "Japan-Rok relations".
Korea was able to develop semiconductors thanks to U.S. efforts to suppress Japan s strong semiconductor development in the 1980s. To a certain extent, Samsung Electronics, SK and other South Korean enterprises were nurtured. South Korea adopted the "government + big consortium" model to promote the gradual development and expansion of the chip industry. Indeed, Korea has seized the opportunity to take over the baton of semiconductor industry development.
The whole, the original South Korea's integrated circuit industry in the field of design, manufacture and equipment are relatively weak, and in 1975, the south Korean government announced the support of the semiconductor industry "six years plan" to support local development, by 1983, samsung factory in gyeonggi province enter the semiconductor field, then the global semiconductor industry from 1983 to 1987 into the trough, Samsung has increased counter-cyclical investment, and the South Korean government has invested 346 million US dollars to implement the semiconductor Industry Revitalization Plan, which has continued to grow.
At the same time, with the rise of personal computers, Japanese enterprises gradually lost market share due to the research and development of high reliability products. Samsung and other South Korean enterprises launched short life and low price DRAM products to seize the personal computer market, and their market share increased rapidly.
In 1987, as memory prices recovered, Samsung quickly became profitable, and by 1992 it had overtaken Nec to become the world's largest maker of memory chips.
In addition, policy support is another supporting force for Korea's semiconductor development. In 1994, Korea introduced a semiconductor chip Protection Law. Since then, the Korean government has designated the chip industry and technology as core technologies that affect national competitiveness, and has made efforts to guarantee technology and property rights.
Large semiconductor industry has developed to a samsung and SK hynix, IC, semiconductor equipment manufacturing enterprise and semiconductor materials enterprise layers of division of labor, through the way of outsourcing, OEM build large semiconductor industry chain, formed yongin, into urban agglomeration, lichuan and so on semiconductor industry, supporting the south Korean semiconductor industry chain.
Currently, Samsung and SK Hynix are leading the memory market.
However, in addition to the relatively backward manufacturing sector, Japan's upstream semiconductor materials and equipment sector is still an important pole that cannot be ignored in the global semiconductor industry chain.
In 2019, Japan and South Korea relations colder, extends to the trade dispute by political disputes, Japan restricted exports to Korea semiconductor production indispensable "hydrogen fluoride", "holistic with photoresist (sensitizer)", used for OLED panel to protect parts of the fluorinated polyimide "three kinds of semiconductor materials, lead to samsung, SK hynix is faced with the problem of" difficult to import materials and equipment ", Japan's punches hit South Korea's Achilles heel.
According to data from May 2019, total exports of South Korea's INFORMATION and communication technology (ICT) industry shrank 22.6 percent year-on-year to $14.31 billion, with semiconductor exports down 30 percent, displays down 21.5 percent and mobile phones down 33.9 percent.
Although since then South Korea has been promoting the relevant category of domestic localization. But progress has faltered, and Japan remains the most important source of imports for South Korea's semiconductor sector. Data showed that in 2021, South Korea imported $6.3 billion of semiconductor manufacturing equipment from Japan, up 44% year on year.
Second, South Korea was suppressed by the United States, resulting in its semiconductor industry "independent".
Since 2018, the United States has increased its pressure on China's semiconductor industry, especially after the ZTE and Huawei incidents. The Semiconductor industry in South Korea is afraid of repeating the situation that Japan did in those days and now the semiconductor industry in Mainland China is suppressed. Therefore, Although South Korea is reluctant, it is still "following the footsteps" of the RELEVANT policies, deeply influenced by the US policy.
Tom Foudy, a British expert on East Asia, has pointed out that South Korea's lack of courage to stand up to the bullying and manipulation of being treated as a vassal by the United States is the direct cause of its loss in the technological war.
In May, South Korea's Samsung Electronics announced it would invest $17 billion to build a new 5nm fab in Texas, the United States, which is expected to start operating in 2024. In addition, Samsung will add another 3,000 quality jobs to its more than 20,000 employees in the United States, in response to the financial support and real estate tax exemption from the United States for 10 years.
The U.S. is trying to push China out of the global semiconductor supply chain by forming a "CHIP4" alliance (the U.S., Japan, South Korea, and Taiwan). The relationship between the U.S. and The Korean semiconductor industry is likely to continue for a long time.
Korean semiconductor faces two risks in the future as the market changes rapidly
In the past two years, the global semiconductor market has experienced a "roller coaster" situation due to the impact of COVID-19 and the worsening global economy. In the first half of the year, the global chip shortage continued to spread, and in the second half, the global semiconductor market faced "ice and fire" : Consumer electronics and advanced process (7nm and below) chips have seen a surge in inventory and oversupply, while mature process automotive chips are still in short supply.
Technology stocks, meanwhile, and under the global economic recession fears, smart phones and display market downturn, household consumption peak, the consumer electronics market in sales, the semiconductor sector investment cuts, chip stocks fell back, the Philadelphia semiconductor index has fallen nearly 40% since this year, much higher than the standard & poor's 500 index's 19% drop.
All this indicates that the semiconductor market is undergoing drastic changes and the industry is entering a downward cycle.
On June 30, May data released by Statistics Korea showed that the country's chip inventories rose 53.4% year on year, the biggest increase in four years. Meanwhile, South Korean chip shipments slowed in May, rising just 8.9 per cent year on year, the first single-digit increase since October 2019, while output growth also slowed to 24.3 per cent.
In the global semiconductor market, Korea is leading in DRAM memory chips and NAND Flash chips, but Samsung and the Korean semiconductor industry as a whole are falling behind in core technologies for future chips such as semiconductor manufacturing and AI semiconductor.
The first is the field of wafer foundry. In just three years, TSMC's market share far exceeded That of South Korea's Samsung.
TrendForce released the "global FOUNDRY ranking" data, from 2020 to 2022 Q1, Samsung has been under pressure by TSMC to the second place, and umC, Wafer Chip, SMIC, Huahong are catching up. In Q1 2022 alone, TSMC accounted for 53.6% of the global FOUNDRY market share, while Samsung ranked second with 16.3%.
In fact, Samsung will not be able to provide qualcomm, its major customer, with a stable supply of Snapdragon cell phone chips from early 2021 due to the poor yield of 5nm chips produced on contract. Finally, last fall, Qualcomm began to expand its outsourcing to TSMC, and Apple began to expand its TSMC orders. According to analyst Ming ð ¹, Samsung has lost some of its biggest customers, such as Qualcomm and Apple
In June, Samsung replaced two key executives: Song Jae-hyuk, vice president of Samsung Electronics, as the head of the semiconductor Research center for next-generation chip development; Nam Seok-woo, Vice president of infrastructure, took over as head of Samsung's foundry technology center.
In the face of the risk of performance recession, the stable growth of South Korea's semiconductor industry in the future still depends on expanding the foundry sector to ensure profits, but at present, Samsung and South Korea's FOUNDRY industry cannot hold up the overall situation. Samsung's april-June 2022 results, released on July 7, showed a 21% year-on-year increase in sales and an 11% year-on-year increase in operating profit for the period, well below market expectations.
The second problem is the lack of self-developed technology in fields such as advanced AI chips due to a shortage of semiconductor professionals in Korea.
According to the Korea Economy on May 5, the shortage of talent is worsening as global investment in semiconductor equipment is booming. Korea is expected to face a shortage of 30,000 semiconductor workers from this year to 2031. In 2022 alone, only 150 out of 650 semiconductor graduates will be able to directly enter the workforce with master's and doctoral degrees.
This has led to the absence of Korea in fields such as AI chip design. According to official data, Korea accounts for 56 percent of the global memory semiconductor market, but only three percent of the global system semiconductor market, of which AI chips are a type.
In June this year, the South Korean government announced that it will take the lead in promoting advanced chip research and development, and will build large-scale data centers using AI semiconductors based on local NPU (embedded neural network processor) for the development of AI products and services.
Meanwhile, the Korean government announced on July 20 that it plans to cultivate 150,000 semiconductor professionals over the next 10 years, including more than 7,000 AI semiconductor professionals. According to the plan, Seoul National University, Sungkyunkwan University, Soongsil University will open a joint AI semiconductor major. The number of students who can study semiconductors will be increased to 5,700, and related disciplines such as electrical and electronic engineering, computer engineering, and physics will jointly run the courses.
In addition, Korea is still heavily dependent on imports, falling behind China, Japan and the U.S. in the fields of chip software and EDA tools, automotive chips, and semiconductor equipment and materials.
What does Korea's revival of its semiconductor industry inspire China?
As a strategic, fundamental and pioneering industry, chip is very dependent on the global industrial system. At present, there are 23 countries and regions in the world with the ability to participate in multiple aspects of the semiconductor industry.
As of 2019, U.S. companies accounted for nearly 50 percent of the global semiconductor trade market, followed by Nearly 20 percent for South Korean companies, 10 percent for Japan and Europe, and 5 percent for Mainland China and Taiwan.
Over the past 50 years, chip design and EDA software from the United States, semiconductor materials from Japan, memory from South Korea, lithography equipment from Europe, and wafer foundry from TSMC have all become regional strengths in global semiconductors, with a cluster effect in supply chains.
However, the technology competition between China and the United States, the COVID-19 pandemic, and the conflict between Russia and Ukraine have disrupted the globalization of semiconductors.
Now, the change of government in South Korea, the resignation of President Moon Jae-in, Yoon's massive investment in the local chip semiconductor industry, and the formation of the strongest chip alliance with the United States to contain China have created new variables in the global semiconductor situation.