Non-Memory Without M&A Progress... K-Semiconductor Must Fly with 'Two Wings' [Tech War, Birth of Advanced Nations]

Rising Concerns in the Semiconductor Industry
Memory Dominates as Overwhelming No.1, Non-Memory Still in Early Stages
Support Measures Needed to Address Labor Shortages and Various Regulations

Over the past 30 years, South Korea has maintained an ‘ultra-gap’ in the global memory semiconductor market, solidifying its position as the undisputed number one. Last year, Samsung Electronics ranked first and SK Hynix ranked fourth in global semiconductor company sales.

However, an unprecedented ‘sense of crisis’ is spreading in the semiconductor industry recently. Although South Korea holds a dominant position in the memory semiconductor market, its market share in the system semiconductor sector is significantly low. System semiconductors account for 70% of the total semiconductor industry sales, while memory semiconductors make up only 30%. In fact, no Korean companies appear among the top 10 fabless (design) and foundry (contract manufacturing) companies in the system semiconductor sector.

The problem is that there has been no news of mergers and acquisitions (M&A), which could serve as a means to catch up. Chronic labor shortages and various regulations are also heightening the sense of crisis. There are concerns that the growth of K-semiconductors, which have played a pivotal role in the Korean economy, is not progressing as rapidly as before. Meanwhile, the United States, China, and Europe have successively declared their ‘semiconductor rise,’ threatening the status of ‘Republic of Korea’ as a leading semiconductor nation.

◆ Overwhelming Memory... ‘Non-memory’ in Its Infancy = According to industry sources on the 17th, South Korea once again confirmed its position as the world’s strongest country in the global semiconductor market last year. According to market research firm IC Insights, Samsung Electronics’ semiconductor sales last year reached $83.085 billion, reclaiming the world’s number one spot from Intel ($75.55 billion) after three years. SK Hynix also ranked fourth with $37.267 billion in sales.

This success is attributed to remarkable achievements in memory semiconductors. Last year, Samsung Electronics held a 43.6% share of the global DRAM market, and SK Hynix held 27.7%, resulting in a combined domestic market share of 71.3%. The ability to maintain the ‘ultra-gap’ is analyzed to be due to overwhelming technology. For example, SK Hynix recently began mass production of the world’s highest-performing DRAM, ‘HBM3.’

However, the limitation of the Korean semiconductor industry is that aside from these two companies, there are no notable firms. As a result, the system semiconductor sector, which accounts for a large portion of the total semiconductor industry sales, is far behind competing countries.

According to market research firm TrendForce, four of the top 10 foundry companies are Taiwanese. As of the second quarter of last year, their combined market share reached 63.3%. In contrast, South Korea had Samsung Electronics and DB HiTek on the list, but their sales were only a quarter of those of Taiwanese companies.

The problem is that there is no suitable strategy to catch up. In particular, neither Samsung Electronics nor SK Hynix has established M&A plans that could raise their industry rankings. It is difficult to proceed due to the walls of global checks and balances. Samsung Electronics has not conducted any large-scale M&A exceeding 1 trillion won since 2017.

Meanwhile, overseas competitors are aggressively accelerating their pace. Intel in the United States has created a dedicated automotive organization in its foundry division to pursue a fierce chase. As the automotive semiconductor market emerges as a new future growth engine, Intel aims to preempt the market ahead of Samsung Electronics and others. Intel also announced the acquisition of Tower Semiconductor, an Israeli foundry ranked eighth globally.

TSMC, the dominant number one in the foundry market in Taiwan, also announced its largest-ever investment plan. Notably, it is building a semiconductor factory in partnership with Japan’s Sony, a competing country. This exemplifies the increasingly fierce ecosystem in the industry.

Feeling the sense of crisis, Samsung Electronics, South Korea’s leading semiconductor company, is also accelerating its response. On the 14th (local time), Vice Chairman Lee Jae-yong visited ASML in the Netherlands, the sole producer of extreme ultraviolet (EUV) lithography equipment essential for advanced semiconductor processes.

This move reflects a strong determination to secure EUV equipment ahead of competitors such as TSMC and Intel. Since EUV equipment significantly influences productivity, which determines semiconductor competitiveness, competition over it is intensifying day by day.

[Image source=Yonhap News]

◆ "A Half-Year Gap Determines Victory or Defeat"... Urgent Need for Government Support = In this situation, it is difficult for Korean companies to achieve remarkable results in the global semiconductor market competition through private efforts alone. This is why calls for the government to prepare direct and practical support measures are gaining strength.

The most pressing issue is the ‘labor shortage.’ Both Samsung Electronics and SK Hynix are suffering from a deepening shortage of specialized personnel. At the ‘Semiconductor Industry Ecosystem and Talent Demand’ public forum held on the 15th, Professor Hwang Cheol-sung, Chair Professor at Seoul National University, stated, "Our semiconductor industry will face a shortage of 5,565 high-level personnel over the next 10 years until 2032."

There are also strong calls for the government to play an active role in regulatory issues related to semiconductor factories. Looking at the case of Samsung Electronics’ Pyeongtaek Campus, known as the world’s largest semiconductor factory, it took about seven years from site selection at the end of 2010 to full operation. This was due to difficulties in obtaining permits from local governments amid opposition from residents. The situation is similar for SK Hynix’s Yongin Semiconductor Cluster.

In contrast, Taiwan and the United States often take less than two years from site selection to operation. ‘How quickly a factory is built and products are produced’ is an important indicator of competitiveness, but South Korea falls far short of major competitors. An industry insider lamented, "Even when private companies plan and implement investments, they tend to be delayed by various regulations," adding, "The government must actively step in to simplify administrative procedures and resolve regional conflicts and conflicts of interest."