[Peace&Chips] Apple, the 'Eye of the Storm' in Korean Semiconductor Industry

Apple Faces Controversy Over Selection of Chinese Supplier YMTC, US Warns "Don't Play with Fire"
Apple, Supporting TSMC's US Factory, Shifts to Lead Supply Chain Restructuring

Apple's Moves Shake Korean Semiconductor Industry
Competition Intensifies from Memory to Foundry Sectors

Editor's NoteSemiconductors. We hear about them every day, but when it comes to explaining the concept, it's hard to find the words. They're called the rice of modern industry, so it's something you shouldn't be ignorant of, yet articles and books about semiconductors are so difficult that people tend to avoid them. But did you know that semiconductors are actually quite fascinating? Even a single semiconductor component hides the mechanisms of the entire industry and the interests of nations. Peace and Chips will spoon-feed you the hidden contexts and meanings of this somewhat uncomfortable semiconductor field. Just place your spoon on the table.

[Asia Economy Reporter Kim Pyeonghwa] "Apple is playing with fire." This was the criticism Apple received from the U.S. Congress last September. The statement came from Senator Marco Rubio, a member of the Republican Party, after news broke that Apple might install NAND flash memory produced by China's Yangtze Memory Technologies Co. (YMTC) in its iPhones. Senator Rubio also warned that if Apple actually proceeded with this move, it could face an unprecedentedly intense investigation from the federal government.

The harsh expression, reminiscent of North Korean news, stems from the U.S.-China hegemonic rivalry. The United States regards the semiconductor sector as a core of economic security and is focused on blocking the growth of China's semiconductor industry. Since Apple, a domestic company, showed opposing behavior, the U.S. issued a strong warning. One month after the "playing with fire" remark, in October, the U.S. specifically targeted YMTC for semiconductor equipment export restrictions.

This news also caused ripples in the domestic semiconductor industry. South Korea's semiconductor sector mainly focuses on memory semiconductors, including NAND flash. Samsung Electronics and SK Hynix hold more than half of the global NAND flash market share. However, the possibility of a Chinese supplier emerging, despite previously low evaluations of China's technological capabilities, surprised the industry. Apple is a major player in the semiconductor industry and is known for being very selective in choosing suppliers, so the domestic industry inevitably felt a sense of crisis.

Eventually, the controversy seemed to subside when news came that Apple had halted discussions on selecting YMTC as a supplier due to worsening local public opinion. However, the domestic industry is once again unsettled as Apple has taken the lead in the U.S. semiconductor supply chain restructuring. Apple announced last week that it would only use semiconductors produced at the Taiwanese TSMC factory being built in Arizona, USA.

Currently, the U.S. is encouraging global companies to invest locally to reorganize the semiconductor supply chain centered on its own country. This year, it introduced the Chips and Science Act (CSA), which provides tax incentives to companies building semiconductor production facilities in the U.S. TSMC is a foundry business that manufactures semiconductors ordered by fabless (semiconductor design) companies. In line with the U.S. initiative, TSMC recently decided to expand the scale of its advanced semiconductor factory under construction in Arizona. Apple's decision could thus provide significant support to the U.S. government.

For Samsung Electronics, which is chasing TSMC in the foundry business?a contract manufacturing industry?this adds to the pressure. Market research firm TrendForce evaluated that in the third quarter of this year, TSMC (56.1%) widened its lead over second-place Samsung Electronics (15.5%) in the foundry market, increasing its dominance compared to the previous quarter. They also explained that TSMC's revenue grew as its client Apple released the new iPhone 14 series during that quarter. Amid an economic downturn causing a slump in the semiconductor market, the competitive hurdles for domestic companies have risen not only in memory but also in the foundry sector.