Chipmaking slowed by red tape in Korea

Tech

Published: 19 Jun. 2022, 07:00

Chipmaking slowed by red tape in Korea

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

Government bureaucracy is slowing the construction of semiconductor manufacturing capacity in Korea, according to a number of industry sources.

They say this is a big problem in terms of competitiveness, as the key to winning orders is being able to ramp up capacity fast and meet the demand of clients.

In Korea, chipmakers have to get approval after approval from the central or regional governments in order to build infrastructure for chip plants, dragging the process out for years.

It's all much faster outside Korea.

Taiwan's TSMC made a surprise announcement in October last year that it will build a chip plant in Japan.

"We have received strong commitments for this project from both our customers and the Japanese government," said TSMC CEO C.C. Wei in a conference call following earnings results.

Six months later, in April this year, TSMC broke the ground in Kumamoto, southern Japan. Jointly run by TSMC and Japan's Sony Semiconductor Solutions, the new advanced chipmaking factory will start operations at the end of 2024.

Samsung Electronics' chip manufacturing campus in Pyeongtaek, Gyeonggi. [SAMSUNG ELECTRONICS]

Samsung Electronics selected a site in Pyeongtaek, Gyeonggi, in 2010 to establish a chip plant, but it took five years for the construction to kick off. The Pyeongtaek Plant 1 began mass production two years and a couple of months later, in July 2017.

The company's Pyeongtaek chip complex continued to hit bumps even after construction began in 2015. Local residents in nearby cities — Dangjin, South Chungcheong, which is in the west of Pyeongtaek, and Anseong, Gyeonggi — were up in arms against the building of the necessary infrastructure to supply power to the chip plant.

Dangjin took the case to court, arguing that building a power convertor station in the city may affect the health of the locals, but the Supreme Court ruled in favor of Samsung Electronics in 2017. In case of Anseong, the company reached a settlement in 2019 with local residents and agreed to pay for underground power.

"It took 12 months, the shortest time ever, to build the Pyeongtaek Plant 3, which is the biggest fab in the world," said a semiconductor industry insider who wished to remain anonymous, "but it took five years to get licenses and build infrastructure."

SK hynix had to wait two years to get approval from the Yongin city government in March last year after it announced a plan to build a large semiconductor cluster in the city in 2019. What stalled the project was the environmental review, and SK hynix is still inspecting the surrounding areas and making settlements with residents.

Construction is to start on the first chip plant in the Yongin cluster in 2025, with operations starting in 2027.

SK hynix co-CEO Park Jung-ho, right, speaks during an event designed to promote the importance of chip production in Korea at Samsung Electronics' chip complex in Pyeongtaek, Gyeonggi, on May 13, 2021. [JOINT PRESS CORPS]

Samsung Electronics is set to begin construction this year on chip plant in Taylor, Texas announced in November.

Construction of its chip plant in Austin, Texas, which was built in 1996, began two months after the property deal was signed, and manufacturing began about two years after that.

SK hynix signed a contract for a chip factory in Wuxi, eastern China, in August 2004, and operations began a year and eight months later.

President Yoon Suk-yeol's transition committee pledged to lift regulations regarding the construction and expansion of semiconductor plants in April, citing semiconductors as top priority.

"It takes two and a half years to build a chip factory in the United States or in Taiwan, while it's six to seven years in Korea," said Park Jea-Gun, engineering professor at Hanyang University and the president of the Korean Society of Semiconductor and Display Technology.

"Competitiveness is bound to decline like this," said Park.

A semiconductor industry insider said that "it would be much more effective if the central government takes care of all processes regarding infrastructure, which requires the regional government support now."

BY LEE SU-JEONG [shin.hanee@joongang.co.kr]