[Chip Talk] 'Semiconductor Equipment' as Humanity's Greatest Strategic Resource... What is Korea's Position?

Core 'Weapon' Determining Tech Hegemony Victory
Korean Semiconductor Equipment Localization Rate Only 20%
Vulnerable to Diplomatic and Geopolitical Risks

[Asia Economy reporters Moon Chaeseok and Han Yeju] The Netherlands, which supplies core equipment for semiconductor ultra-fine processes, has become involved in the 'technology hegemony war' between the United States and China. Semiconductor equipment plays a key role as a crucial 'weapon' in determining the outcome of the technology hegemony war because it enhances the efficiency of smartphones, consumer electronics, data centers, and automobiles. This is also why the United States started by 'controlling equipment' in Chinese semiconductors.

The industry generally considers the history of semiconductors to have begun in 1947 when the Bell Labs in the United States invented the transistor. Korea developed transistor chips in the 1970s. Subsequently, as integrated circuits (ICs) were developed to allow multiple transistors to be assembled on a single substrate, the pace of semiconductor miniaturization accelerated. The 'photolithography' process machines used in developing these transistor chips mark the starting point of semiconductor equipment.

Photolithography continues to evolve and is used in advanced semiconductor processes. It is also a spark in the 'US-China war.' When news emerged that the Chinese company SMIC produced 7-nanometer chips without ASML's photolithography equipment, the United States began imposing extensive equipment regulations on China. Recently, ASML's extreme ultraviolet (EUV) lithography equipment, which the US has banned from being imported into China, is also used in ultra-fine processes. The history of semiconductor equipment can be seen as shifting from photolithography equipment for transistor chips used in memory semiconductors and displays to EUV lithography equipment necessary for advanced system semiconductor foundry production.

So, what is the level of Korea's semiconductor equipment self-reliance? The localization rate of semiconductor equipment is about 20%. In particular, more than 70% of total imports depend on the United States, Japan, and the Netherlands, making the structure vulnerable to diplomatic and geopolitical risks.

Of course, it is a positive development that the 'world's top four equipment companies' have simultaneously made investments in Gyeonggi Province, where Korean semiconductor facilities are concentrated. The world's largest semiconductor equipment company, Applied Materials (AMAT), has decided to build a research and development (R&D) center in Gyeonggi Province, and the Dutch company ASML signed an investment agreement last year with Gyeonggi Province and others to invest 240 billion won. US-based Lam Research established the 'Korea Technology Center' in Yongin, Gyeonggi Province, responsible for developing cutting-edge equipment, and Tokyo Electron (TEL) built a technical support center in Pyeongtaek and a new R&D center in Hwaseong.

However, US restrictions on China and regulations on Chinese factories of Korean companies such as Samsung Electronics and SK Hynix remain significant 'obstacles.' If the US does not grant a waiver for Samsung and SK's Chinese factories next year due to political calculations, domestic companies have reportedly told investors that they might relocate local fabs (factories) or equipment to Korea or elsewhere. On the 26th of last month, SK Hynix's business officer Noh Jong-won stated during the Q3 earnings conference call, "If problems arise in operating factories in China, including the Wuxi plant, due to equipment import issues, we must activate an 'emergency plan.' In the worst-case scenario, where operation is deemed difficult, we are considering various scenarios such as selling the factory, selling equipment, and transporting it back to Korea."

Experts assess that considering the oligopolistic structure of the semiconductor equipment market, it will be difficult to achieve semiconductor equipment localization and diversification of import countries in the short term. Kang Sang-ji, a researcher at the Korea International Trade Association, analyzed, "The global semiconductor equipment market is characterized by high technological barriers and an oligopolistic structure, with the world's top five semiconductor equipment companies occupying 79.5% of the market share. Korea's semiconductor equipment import volume reached a record high last year, and depending on the semiconductor industry's business conditions, import volume may increase further in the future."