U.S.-China tech war hitting Korean chipmakers hard

Tech

Published: 26 Apr. 2022, 18:59 Updated: 26 Apr. 2022, 20:05

U.S.-China tech war hitting Korean chipmakers hard

[JOONGANG PHOTO]

Korean chipmakers have been hit the hardest by the U.S.-China tech war, according to a report released Monday.

The Federation of Korean Industries (FKI) report shows that the market share of Korean manufacturers declined the most over the past three years since the United States placed trade restrictions on chip exports to China.

The United States imposed trade sanctions on China's Huawei and Semiconductor Manufacturing International Corporation (SMIC) in 2019 and 2020 over national security concerns, limiting purchases by the companies of chips manufactured with U.S. technologies. Companies operating in the United States must receive government approval before making deals with Huawei or SMIC.

While Taiwan, Japan and six Asean countries — Vietnam, Singapore, Thailand, the Philippines, Malaysia and Indonesia — claimed bigger shares compared to 2018, which is before Huawei was first placed on the U.S. trade blacklist, the market presence of Korean and the U.S. manufacturers fell.

TSMC logo at its headquarters, in Hsinchu, Taiwan. [REUTERS/YONHAP]

Korea had 19.2 percent of the China's imported chip market last year, a 5.5-percentage-point plunge compared to 2018. It was a much sharper fall than for the United States, which experienced 0.3-percentage-point decline to 3.5 percent.

Taiwan and Japan achieved higher market shares.

Taiwan had 34.2 percent of the market, up 4.4 percentage points compared to 2018, and Japan's share increased 1.8 percentage points to 5.8 percent.

China's chip imports increased by 37.2 percent to $468.6 billion last year from 2018, and of that, import volumes from Taiwan jumped 57.4 percent to $160.2 billion. Chip imports from Japan rose by 34.8 percent to $27.1 billion.

Korea's chip exports to China increased by 6.5 percent to $89.9 billion.

Chinese President Xi Jinping, left, looks around a chip plant of Wuhan-based Yangtze Memory Technologies (YMTC) in April 2018. [XINHUA/YONHAP]

In 2021, China's chip imports were nearly double the country's crude oil imports. Under the Made In China 2025 initiative announced in 2015, the country aims to locally produce 40 percent of the chips it consumes within five years, but China was only 15.8 percent self-sufficient in chips in 2020.

China procures most integrated circuits from overseas companies, such as Taiwan's TSMC and UMC, Korea's SK hynix and Samsung Electronics, and Intel from the United States, according to market tracker IC Insights in 2020.

The country is accelerating its bid for chip self-sufficiency, with integrated circuit sales growing 61 percent in value and 94 percent in volume over the past three years.

SMIC plans to invest $5 billion to expand its production volume, the company announced in February.

As countries are vying for chip supremacy, experts are calling for stronger support from the government.

The FKI report showed that the ratio of government subsidies to annual sales was the highest in China, with SMIC topping the list at 6.6 percent. For China's Hua Hong Semiconductor and Tsinghua Unigroup, the ratio was 5 percent and 4 percent, respectively. The U.S. companies also got a significant amount of government support: 3.8 percent for Micron, 3 percent for Qualcomm and 2.2 percent for Intel.

Korea is far behind, with Samsung Electronics at 0.8 percent and SK hynix at 0.5 percent.

"The major chip exporters including the United States, China, the EU and Japan are ramping up investment to achieve chip self-sufficiency and improve the supply chain. The incoming government has to strengthen supportive measures for semiconductor companies in terms of research and development and tax benefits," said Kim Bong-man, head of the FKI's international affairs department.

BY KIM GYEONG-JIN, SHIN HA-NEE [shin.hanee@joongang.co.kr]