[Crisis in K-Semiconductors] High-Value Memory and Foundry Restructuring... Must Launch an All-Out 'Public-Private Joint' Effort

③To Win the Semiconductor War

Industry Leaders like Samsung and SK Seek New Paths
by Developing High Value-Added Memory Products

Government Must Simultaneously Ease
Regulations on Taxation, Workforce, and Infrastructure
Positive Moves Include Floor Area Ratio Relaxation and Tax Reform

[Asia Economy Reporter Moon Chaeseok]

"The private sector leads, and the government supports."

Semiconductors are precisely the battlefield where the Yoon Seok-yeol administration's 'public-private joint' philosophy must be realized. The government's announcement yesterday of comprehensive tax benefits and talent development plans to achieve a 'semiconductor superpower' is seen as a strong commitment to actively support the 340 trillion won investment pledged by companies over the next five years.

Experts emphasize that, given the recent 'fear of R (Recession)' and the high likelihood of a fierce survival game replaying in the once-booming semiconductor market, companies and the government must establish a two-track strategy to turn the crisis into an opportunity. For companies, mass production of high value-added memory semiconductors such as DRAM and NAND flash, along with restructuring the foundry (semiconductor contract manufacturing) business, is suggested as the key. The government is urged to classify short- and mid-to-long-term policies and simultaneously support factors affecting corporate management such as workforce, taxation, and infrastructure.

Samsung and SK Fight for Survival with New Product Development and Business Restructuring

Samsung Electronics' industry-leading high-speed GDDR6 (Graphics Double Data Rate 6) DRAM. (Photo by Samsung Electronics)

The concern that 'K-semiconductors' are entering a freezing period stems from profitability deterioration due to price declines. The causes include decreased demand for major memory semiconductors like DRAM and NAND flash, expanded supply chain risks from the Russia-Ukraine war, and increased economic uncertainty. These are challenges difficult for individual companies to solve alone.

Accordingly, the industry is seeking a breakthrough through the development of high value-added new memory products. In the past, there were many competitors such as the U.S. Micron, Japan's Elpida, Taiwan's Nanya, and Germany's Qimonda, allowing a 'chicken game' strategy of increasing supply to lower prices and dominate competitors. However, now the judgment is that producing high-profit, high-quality products to attract as many customers as possible is the decisive factor.

For example, Samsung Electronics' world-first development on the 14th of the EUV 10nm-class 3rd generation (1z) 16Gb GDDR6 (Graphics Double Data Rate 6) DRAM is representative. The 3nm DRAM operates at 24Gbps, over 30% faster than the previous 18Gbps, capable of processing 275 Full HD movies in one second. It is used not only for enhancing graphics performance in PCs, laptops, and game consoles but also broadly in high-performance computing (HPC), electric vehicles, and autonomous vehicles. A Samsung Electronics official stated, "The memory business will be conducted mainly around servers to actively respond to demand," adding, "We plan to actively respond to new demand by maintaining a server and high-spec product mix operation policy and expanding supply such as DDR6."

New product development alone is not enough. Korea's industrial ecosystem, including fabless (design), materials and equipment, and post-processing packaging, is weaker compared to the U.S. and Taiwan, making it reliant on the performance of integrated semiconductor companies like Samsung and SK. Considering the difficulty for these companies to quickly acquire design capabilities, the industry diagnosis is that they have no choice but to compete in the foundry sector, mass-producing semiconductors ordered by global big-tech customers. According to market research firm TrendForce, in Q1, the global foundry market share was led by TSMC at 53.6%, followed by Samsung Electronics at 16.3%. Since Samsung announced on the 30th of last month that it secured mass production of the cutting-edge '3nm Gate-All-Around (GAA)' technology, which increases semiconductor chip density, ahead of TSMC and others, it must capture as much market share as possible before TSMC catches up in process technology.

Government Declares 'Semiconductor Superpower'... "We Will Provide Clear Support"

[Image source=Yonhap News]

One clear fact is that the U.S. Senate's first approval on the 19th (local time) of a $52 billion (about 68 trillion won) support bill for overseas semiconductor companies points to the 'foundry' sector. Except for domestic company Intel, only Korea's Samsung and Taiwan's TSMC have the capability to operate foundry businesses, but all are located near China, prompting efforts to bring factories to the U.S. For Korea, ignoring China is also difficult. Samsung Electronics operates in Xi'an, and SK Hynix in Wuxi. Kwon Oh-kyung, chairman of the Korean Academy of Engineering, advised, "Korea must consider how to manage relations with China while collaborating with the U.S."

Semiconductor companies lament that it is difficult to dominate U.S. and Taiwanese firms solely through independent technology development and business strategies. This is due to intensified funding pressures from global inflation and rapid interest rate hikes, as well as major powers like the U.S. and China attempting to confine supply chains under their influence. For these reasons, voices call for the government to simultaneously ease regulations on taxation, workforce, and infrastructure. Separate, fragmented support is seen as inefficient.

The government's measures announced this week, including nurturing 150,000 talents over 10 years (workforce), relaxing floor area ratio limits from 350% to 490% (infrastructure), and raising large corporation tax credit rates from 6-10% to 8-12% (taxation), are positively evaluated. The relaxation of floor area ratio regulations allows taller buildings on the same site, aiding production capacity enhancement. Increased tax benefits facilitate corporate financing. However, the market voices that continuous policy support, not one-off measures, is necessary to aid corporate management strategy formulation. An industry insider said, "In the semiconductor business, which requires massive capital, the timing of management decisions is most important," adding, "The government's 'package support' positively influences companies' judgment on the 'direction' needed to secure competitiveness."