Invincible no more
The author is an editorial writer of the JoongAng Ilbo.
South Korea’s chip supremacy is at a turning point as the industry gets caught in the crossfire of a tech war between the United States and China. Japan is out to resurrect its once-mighty semiconductor industry and the European Union seeks self-reliance in chip supplies. Korea is swept up in a global conflict and it is uncertain how long it will go on. But one thing is certain. Samsung Electronics’ No. 1 position is in jeopardy.
Korea has enjoyed a near monopolistic control of memory chips for decades. The U.S. surrendered its dominance in chipmaking to Japan in the 1980s and then to Korea from the 1990s. America dominated the design of non-memory system chips that act as the computer’s brain and did not think it necessary to product memory chips. It sourced them cheaply from Korea and Japan.
But the arrival of the fourth industrial revolution has changed America’s thinking. Stable supplies of high-performance semiconductors have become essential to national competitiveness given mounting demand in the fields of automated vehicles, artificial intelligence, superfast internet infrastructure and defense equipment. The ever-increasing demand for chips has brought about a super business cycle.
China’s ambition to topple the U.S. in both economic and defense power by 2050 also accelerated the shift in U.S. policy. Chip production is the last goal in China’s crusade to achieve supremacy. It has become a game-changer in the competition between America and China. As a result, Korea’s dominance in chipmaking could come to an end. The U.S. government is encouraging chip manufacturing with $50 billion in fiscal stimuli. U.S. chipmakers Micron Technology and Intel have pledged massive investment. Samsung Electronics, the dominant player in memory chips, and Taiwan’s TSMC, No. 1 in the foundry business, also vowed large-scale investments in the U.S.
Since the U.S. holds core chip design technology, the producers cannot ignore demands from Washington. Holding a waver in his hand in a virtual conference on April 9 in the White House, President Joe Biden declared semiconductors were part of “the infrastructure” responsible for the country’s present and future. He was more or less declaring a war with China. The United States is also investing heavily to establish Open Radio Access Network (O-RAN) to enable mobile network operators use equipment from multiple vendors to destabilize the dominant 5G equipment provider Huawei Technologies of China. Samsung Electronics is also caught in the middle of this battle.
But Samsung is without leadership as its leader is serving a prison term for bribery of the removed president Park Geun-hye. Lee Jae-yong, vice chairman of Samsung Electronics, is cooling his heels in a cell instead of travelling the world to respond to the rapid changes in the industry. E-commerce giant Alibaba’s future has become uncertain too because its founder Jack Ma’s serious problems with China’s Communist Party.
We thought Samsung Electronics was invincible. But that can be proven to be myth by the ongoing international developments. Its ambition to outstrip TSMC to become No. 1 in the foundry segment through investment of 133 trillion won ($111.9 billion) by 2030 has become uncertain. The Taiwanese foundry company announced a massive investment plan the day Lee was returned to prison in January. TSMC has embarked on the construction of a foundry plant in Arizona and plans to complete it by 2024.
Japan swallowed its pride and pleaded with TSMC to build an R&D center in Japan when the Taiwanese company chose the United States over Japan for its offshore foundry. The new structure of the industry could rock Korea’s chipmaking power. We had relied on Samsung to keep its leadership in semiconductor production, but with global powers all jumping in the game, the future cannot be known. The company cannot defend its supremacy all by itself. The state must do its part in protecting Korea’s chip industry.