All in for chipmaking

The government has announced support measures for the semiconductor industry at an unprecedented scale. The so-called “K-semiconductor strategy” packaged by the government and industry was unveiled at the Pyeongtaek chip complex of Samsung Electronics at a ceremony with President Moon Jae-in and executives of rival SK hynix. It fully reflected the industry’s call for tax incentives for investment and systematic support in grooming of expertise in the field.

The government outlined visions to achieve supremacy in chipmaking by 2030 through the establishment of value chain belt across Pangyo south of Seoul to Giheung, Pyeongtaek and Onyang in the west and Icheon and Cheongju in the east of the capital across Gyeonggi Province. Samsung Electronics and 152 companies will put up more than 510 trillion won ($452 billion) until 2030. The government will establish a special fund of more than 1 trillion won to back foundry and other chip facility investments.

The government-industry collaboration will likely provide a breakthrough in the industry at a time when the world is actively engaged in chip competition. The contest over tech hegemony between the U.S. and China has spilled over to chips, cornering local chipmakers like Samsung Electronics. U.S. President Joe Biden summoned CEOs of 19 companies from four nations, including Samsung Electronics, to demand their investment in the U.S. and join an alliance to contain Chinese rise. The request puts Samsung Electronics and others in an awkward position as they have manufacturing bases in China.

Korea’s tech edge is also being challenged. The gap between Samsung Electronics and TSMC in system chip production has widened when the non-memory sector overwhelms the memory sector where Korea dominates. Even the Korean leadership in memory has come under threat, with the share in DRAM slimming from 46.6 percent in 2016 to 41.7 percent and in NAND flash memory from 38.7 percent in 2017 to 33.9 percent last year.

Chips make up a fifth of Korean exports. Since they affect defense capabilities, the industry must be considered in a securities and diplomatic context. The U.S. has made semiconductors strategic goods and vowed a $50 billion investment in the field. China has pledged 1 trillion yuan ($155 billion) to raise self-sufficiency rate on chips to 70 percent by 2025. Taiwan has even prioritized chipmaking over farm production amid limited resources from a serious draught. The K-semiconductor strategy must set the grounds for another leap in Korean chip power.