The semiconductor challenge

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The semiconductor challenge

South Korea’s semiconductor industry has remained unrivalled on the global stage for the last decade. It still occupies 70 percent of the global memory chip market. But its status is being challenged by traditional multinational players like Intel and rising firms from China.

Backed by government support and cash-rich public entities, Chinese companies are the most formidable competitors. China was behind the recent $19 billion deal allowing hard-disk drive maker Western Digital to purchase SanDisk, a producer of flash memory storage chips that go into smartphones and tablets. The purchase was made after Unisplendour, a unit of China’s state-backed Tsinghua Unigroup Holdings, became the largest shareholder in Western Digital through an investment late last month.

China pays $230 billion every year to import semiconductors, more than it spends on oil. Beijing has been trying to build its own industry to meet its insatiable appetite for memory chips. The latest deal requires approval from Washington, but if the indirect purchase allows China inroads to the NAND memory market, the global semiconductor landscape could undergo a major change.

More immediate challenges come from U.S. rivals. Intel and Micron Technology unveiled new 3D NAND technology that enables three times higher capacities than other NAND technologies - at lower production costs. Intel will expand its fabrication facility in Dailan, China, by investing $5.5 billion to be able to produce the cutting-edge, non-volatile memory flash from the second half of 2016. The central processor-making company, which holds a majority of the core technologies for dynamic random access memory chips, will be targeting the world’s two largest memory-consuming markets of the United States and China. Intel has put forward 10,000 engineers to meet demand for low-power processors that cater to Apple’s mobile devices. It could steal some of the orders from Samsung, which has been supplying Apple with application processors.

Chip-making is the only sector in which Korean Inc. maintains the top spot. But its position could soon fall, as the government’s interest in the sector is waning. Semiconductors are also being shunned in universities. The chip-making industry is drawing fewer workers amid news of employees becoming sick from working at Samsung Electronics’ factories. Samsung’s plan to build a plant in Pyeongtaek has run into trouble with residents amid concerns of hazardous pollution.

Semiconductors is one industry where staying ahead is the key to competitiveness and making a comeback is particularly hard. Korea cannot afford to slip. The government, companies and society must unite to re-strengthen our capabilities.

JoongAng Ilbo, Oct. 24, Page 26

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