[Chip Talk] The Global Semiconductor Ecosystem Gathering in Han... What Does the K-Silicon Valley Look Like?

Global Materials, Parts, and Equipment Companies Head to Korea
Accelerated Establishment of Production Bases Around Samsung and SK Hynix
Expectations and Concerns Toward Semiconductor Cluster

[Asia Economy Reporter Han Yeju] Global semiconductor materials, components, and equipment companies are accelerating the establishment of production and research bases in Korea. Not only the four major semiconductor equipment companies?Netherlands' ASML, America's Applied Materials and Lam Research, and Japan's Tokyo Electron?but also Japanese small and medium-sized enterprises are knocking on Korea's door. For them, Korea is the largest production hub of the world's biggest semiconductor companies, Samsung Electronics and SK Hynix. This is why there is growing anticipation that the semiconductor cluster stretching from Pyeongtaek-Hwaseong-Giheung-Yongin-Icheon will rise to a global level.

According to the semiconductor industry on the 21st, ASML plans to establish a semiconductor cluster in Hwaseong by 2024. They will invest about 240 billion KRW to build an extreme ultraviolet (EUV) equipment training center. This is because Samsung Electronics is one of the largest purchasers of EUV equipment, which ASML is the only company in the world to produce. Samsung Electronics is promoting the introduction of EUV equipment not only for advanced foundry (semiconductor contract manufacturing) processes but also for memory semiconductor production. The demand has increased to the extent that ASML must directly build an EUV equipment training center in Korea.

Investments by the world's four major semiconductor equipment companies in Korea are already ongoing. Applied Materials, the world's number one semiconductor equipment company based in the U.S., recently decided to build a research and development (R&D) center in Gyeonggi Province. When U.S. President Joe Biden visited Samsung's Pyeongtaek plant during his visit to Korea in May, one of the semiconductor equipment products he showed interest in was from Applied Materials. Lam Research, the world's third-largest semiconductor equipment company from the U.S., opened the Korea Technology Center (KTC), a state-of-the-art R&D facility, in the Jigok Industrial Complex in Yongin, Gyeonggi Province, last April. This is Lam Research's first R&D center in Asia, featuring a cleanroom of 30,000 square meters that can accommodate up to 50 pieces of equipment. Tokyo Electron (TEL), the world's fourth-largest equipment company from Japan, is also expanding its R&D facility in Hwaseong with an investment of 100 billion KRW. They plan to complete a six-story advanced R&D center with a total floor area of 33,000 square meters by October next year.

Japanese semiconductor materials, components, and equipment companies are also increasing their investments in Korea. EUV photoresist specialist Tokyo Ohka Kogyo (TOK) has already established a factory in Songdo, Incheon. Kanto Denka Kogyo, a manufacturer of specialty gases for semiconductor chemical processes, relocated its factory to Cheonan. Daiyo Holdings, a semiconductor film manufacturer, settled in Dangjin, Chungnam Province. Other Japanese semiconductor-related companies such as Daikin Industries and Showa Denko have also decided to invest in the Dangjin and Pyeongtaek areas.

The moves by semiconductor equipment companies are interpreted as a way to secure the rationale for investing in Korea while forming close cooperative relationships with Samsung Electronics and SK Hynix. Most of Samsung Electronics and SK Hynix's semiconductor production lines are located in Korea. Especially, semiconductors requiring advanced processes are all manufactured only in Korean factories to dispel concerns about potential technology leakage.

Samsung Electronics has introduced sub-7nm ultra-fine processes and EUV processes only at its Giheung, Hwaseong, and Pyeongtaek campuses in Korea. SK Hynix also produces DRAM in Wuxi, China, but DRAM using EUV processes is manufactured only at the Icheon plant. Cheongju focuses on NAND flash production. SK Hynix is also preparing to start construction in the semiconductor cluster in Yongin, Gyeonggi Province.

For global materials and equipment companies, establishing bases in Korea allows semiconductor manufacturers to avoid critical supply chain disruptions in materials and equipment even when unpredictable risks such as global logistics difficulties occur, thereby stabilizing the supply chain. Moreover, for U.S. companies, due to trade conflicts between the U.S. and China, it is difficult to discuss cooperation with Chinese semiconductor companies, making Samsung Electronics and SK Hynix the most suitable customer base. An industry insider said, "To develop equipment suitable for the advanced semiconductor processes of Samsung and SK Hynix, equipment companies want to build R&D centers where these fabs are located," adding, "They can also secure the rationale for investing in Korea and gain practical benefits by doing business with Korean companies."

However, compared to overseas countries expanding support measures to attract global semiconductor companies, it seems that more time is needed for the domestic semiconductor cluster to take root. Major countries such as the U.S. and Japan are directly involved in attracting semiconductor factories, but criticism is emerging that local governments and the Korean government are not properly coordinating with companies.

The semiconductor industry is in a hurry. Major countries are increasingly entering the competition using semiconductors as a weapon. The U.S. Federal Senate passed the "Innovation and Competition Act" in June last year, pledging to invest $250 billion (about 328.875 trillion KRW) in building domestic semiconductor production bases. China has set a policy to source 70% of its semiconductors domestically by 2025. The European Union (EU) created the "Chips Act" and plans to invest $48 billion (about 63.144 trillion KRW). Japan decided that the government will cover half of the investment costs when new semiconductor factories are built or expanded domestically.