Moody's: Governments Worldwide Address Semiconductor Supply Shortage as National Security Issue

[Image source=AP Yonhap News]

[Asia Economy Reporter Kim Suhwan] An analysis has emerged that governments around the world are increasingly viewing the semiconductor supply shortage as a national security issue and are making concentrated efforts to support the semiconductor industry.

On the 3rd (local time), CNBC cited Timothy Wu of Moody's Analytics, reporting, "The surge in semiconductor demand is unlikely to subside easily," and "Countries are treating the semiconductor supply shortage as a national security issue and are taking action to resolve the problem."

CNBC added that some expect the semiconductor supply shortage to continue until 2023.

Analyst Wu pointed to the issue of supply flexibility as the reason why the semiconductor shortage is prolonged.

He explained, "Semiconductor manufacturing alone takes at least several weeks, and the period until delivery to customers is even longer. In particular, manufacturing specific types of semiconductors requested by customers requires production using suitable technology. Considering this, it can take several years from production to shipment of semiconductors."

Wu also mentioned that the semiconductor industry is capital-intensive, which raises entry barriers and makes it difficult for new manufacturers to enter production competition. In other words, only a few companies such as Samsung Electronics and Taiwan's TSMC dominate the market, so semiconductor production volume is inevitably limited.

Furthermore, Wu explained that since next-generation semiconductors have much higher operating profit margins, manufacturers are likely to focus on producing next-generation semiconductors, which can cause a decrease in production volume of previous generation semiconductors.

Considering that the automotive manufacturing industry mainly uses older generation semiconductors compared to those used in high-performance computers and smartphones, the impact of the semiconductor shortage on the automotive industry is inevitably greater than on other industries.

With semiconductors recognized as a core national industry, CNBC reported that countries are developing their own semiconductor production technologies and making efforts to establish regional supply chains to resolve the supply shortage.

The media focused on South Korea's case. CNBC introduced, "The South Korean government has decided to invest $450 billion (approximately 510 trillion won) by 2030 to foster the semiconductor industry," adding, "Various policy efforts include supporting corporate investments and providing tax benefits."

Earlier, the U.S. Biden administration also prepared a $52 billion semiconductor industry support plan, which passed the Senate in June. Additionally, CNBC reported that the European Union (EU) and the Chinese government are preparing semiconductor industry support measures worth tens of trillions of won.

Analyst Wu predicted, "If more small manufacturers enter the semiconductor industry due to government efforts, the overall semiconductor supply can increase," and "The semiconductor shortage experienced by the automotive manufacturing industry can also be resolved."