[K-K Semiconductor Crisis Theory]① Trying to Catch Up with Japan... Shaking South Korea's Semiconductor Status

"Crisis Awareness Is Gripping the Korean Semiconductor Industry"

[Asia Economy Reporter Park Sun-mi] "A sense of crisis is gripping the Korean semiconductor industry."

Lee Jong-ho, Minister of Science and ICT, recently cited 'a sense of crisis' as the primary reason behind a series of policies aimed at supporting the semiconductor industry in an interview with the British financial newspaper Financial Times (FT). He emphasized the urgent need to devise solutions to address issues such as Korean semiconductor companies receiving relatively fewer tax benefits from the government compared to semiconductor powerhouses like China, the United States, and Taiwan, and facing difficulties in attracting talent. In fact, the word that best describes the current mood in the semiconductor industry is 'a sense of crisis.'

As a traditional memory semiconductor powerhouse, Korea is striving to find balance in the semiconductor industry by strengthening the non-memory sector, including foundry (semiconductor contract manufacturing). However, its position is increasingly narrowing due to intensified competition with other countries that are mobilizing massive subsidies and national funds.

According to the semiconductor industry on the 29th, based on foundry sales in the second quarter of this year, the global market share ranks Taiwan's TSMC first (53.4%) and Samsung Electronics second (16.5%). Although the gap in market share between first and second place narrowed by 0.4 percentage points compared to the first quarter, the gap remains significant. Some point out that Samsung Electronics' second-quarter results do not include revenue contributions from the 3nm process, which the company was the first in the industry to mass-produce. They suggest that the difference in market share between Samsung and TSMC should be closely watched next year when the effects of securing customers for sub-3nm processes become fully apparent.

In June, Samsung Electronics demonstrated its outstanding technological prowess by starting mass production of 3nm products applying the next-generation Gate-All-Around (GAA) technology, the first in the industry. However, major global 'big spender' customers still remain 'all-in' on foundries and are more closely aligned with TSMC, which maintains a scale three times larger than Samsung.

In the industry, it is believed that Qualcomm, which entrusted Samsung Electronics with the production of the 'Snapdragon 8 Gen 1' chipset?the brain of smartphones?at the end of last year, has assigned the production of the 'Snapdragon 8 Gen 2,' launching this November, to TSMC. Additionally, Nvidia, a Samsung Electronics customer, is entrusting the production of its new graphics processing units (GPUs) to TSMC rather than Samsung Electronics. Recently, Nvidia publicly revealed at the launch of its new graphics card lineup that the new GPUs were produced using TSMC's 4nm process and installed in the products.

Even though many chip design companies diversify their semiconductor production by entrusting both TSMC and Samsung Electronics, it has been proven difficult to surpass TSMC in terms of core products and order volume.

Samsung Electronics holds an unrivaled first place in the memory semiconductor sector, a strength of the Korean semiconductor industry, and has become the world's top semiconductor sales company, surpassing Intel. However, the sense of crisis that this structure will soon be broken is growing.

Market research firm IC Insights predicts that TSMC's semiconductor sales in the third quarter of this year will increase by 11% from the second quarter to $20.2 billion, surpassing Samsung Electronics, which is expected to record $18.29 billion, a 19% decrease, and thus claim the world's number one semiconductor position.

The memory semiconductor market, which is considered to be in an oversupply state, is expected to continue deteriorating for the time being, making it inevitable for Samsung Electronics, which has a high proportion of memory semiconductor business, to be hit hard. SK Hynix, specializing in memory semiconductors, is also responding by lowering prices to reduce increasing inventory assets, meaning all Korean semiconductor companies are significantly affected by the downturn in the memory semiconductor market.

While Korea's position in the semiconductor market is shaking, China is pouring enormous funds and efforts into catching up with Korea's technological prowess. China is sparing no support for local players, including YMTC, aiming for semiconductor ascendancy. Recently, it was reported that China's YMTC succeeded in developing 232-layer NAND in the memory semiconductor field and is preparing for mass production within the year.

Although YMTC currently holds only a 3% share of the global NAND market, its success in developing NAND products with more than 200 layers, which require advanced technology, is interpreted as a warning that it could threaten Korea's position in memory semiconductors. Recently, YMTC also secured a small supply order for NAND from Apple, indicating that Chinese-produced memory semiconductors could be included in iPhones.