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Build the much-needed K-chip habitat

Published: 11 Jun. 2023, 20:23

The government hosted a semiconductor strategy meeting under the chair of President Yoon Suk Yeol last week to muster national capabilities to defend the Korean chip industry caught at the crossfire in the contest between the U.S. and China over the leadership for global technology. The government vowed full support for research and development of “destructive and innovative” technologies such as artificial intelligence and power semiconductors for motors, lighting systems and others. It will be more aggressive in broadening the Korean chip prowess from memory to system logic chips and support collaborations between fabless (chip design) companies and foundries responsible for producing chips according to the design. The meeting was attended by government officials, executives from chip-related companies, including memory giants Samsung Electronics and SK hynix, and professors from academia.

President Yoon declared that the chip contest is tantamount to an “industrial war” which demands full national capabilities. Since the war is so intense and unpredictable, innovative power from the private sector and proactive government strategy must be combined, he stressed. The meeting devoted to devising the chip strategy is the third after the ones in July last year and March this year, when the government announced increased tax incentives, an advanced chip cluster project, and commitment to nurture chip specialists.

Semiconductors make up 20 percent of the country’s exports and are responsible for sustaining trade surplus. But shipments have been shriveling due to oversupply since the pandemic and instabilities in the global supply chain from the U.S.-China conflict. Chip exports plunged 40.3 percent in the first four months of the year against a year-ago period. The share of chips in total exports tumbled to 13.4 percent. Samsung Electronics, the household name in memory, reported a nearly 90 percent on-year dip in the operating profit in the first quarter. Its operating profit is expected to plunge 98 percent in the second quarter.

Chip landscape is changing fast. The U.S. has been going all-out to revive its own chipmakers like Intel and draw investments from foreign makers like Samsung to rebuild its chip ecosystem. Japan is making a comeback in the semiconductor field by bringing on major players like TSMC and Micron Technology to build chip factories.

Time is running out for Korea. The Korean version of the Chips Act has passed after much difficulty, and universities are encouraged to create or add quota for chip-related studies. President Yoon specifically ordered an effective financial support system be set up to facilitate listing and funding for digital companies and lifting of regulations that can get in the way of their business. The government and political circles must act fast to expedite the measures to bolster the industry and competitiveness.