[The Editors' Verdict] Japan, the Sunken Semiconductor Powerhouse: How to Avoid Repeating Its Mistakes

Granting Universities and Companies Autonomy in Talent Development
Considering Military Service Exemptions and Tax Incentives

In 1988, Japan dominated the global semiconductor market, holding a 50.3% share and ruling the world. However, today it is difficult to find Japan among the top semiconductor companies worldwide. How did Japan, once the semiconductor powerhouse, come to this? The Plaza Accord, which significantly weakened the competitiveness of Japanese export companies, followed by the US-Japan semiconductor agreements and the memory industry crash, are cited as the main causes of the decline of Japan's semiconductor industry. Additionally, semiconductor experts diagnose that the shortage of talent further accelerated the decline of Japan's semiconductor sector.

A similar analysis appears in the book "Hidden Heroes" by Im Hyung-kyu, former president of Samsung Electronics, who is regarded as a key figure in the history of Korea's semiconductor industry. "(In the 1990s) Japan held global leadership in many industrial fields such as automotive materials. Therefore, science and engineering talents were dispersed across various industries, and the semiconductor sector did not receive sufficient talent supply. The talents that were supplied were again distributed among the five major corporations, so no single company had enough human resources. I believe this greatly hastened the decline of Japan's memory industry."

This does not feel like someone else's problem. Recently, there is growing concern about the concentration of talent in medical schools, which is so intense it is called a black hole. Of course, it is impossible to prevent talents from choosing medical schools. In uncertain times, how can one stop people from choosing professions supported by social status and economic rewards? Likewise, the government cannot control doctors' salaries while emphasizing the public nature of the healthcare system.

Therefore, a paradigm shift is necessary. First, universities and companies must be granted maximum autonomy in nurturing talent. Expanding contract departments where companies can independently cultivate the talent they need, as well as operating flexible academic systems to make fields attractive to talents, should be pursued. For example, introducing incentives such as integrated programs that allow completion of bachelor's, master's, and doctoral degrees within six years or programs enabling master's and doctoral studies at corporate research institutes could be considered.

Second, expanding military service exemptions for advanced industry departments like semiconductors is worth considering. Returning to former President Im's story, he said that when he saw a recruitment announcement for new employees at Korea Semiconductor in the fall of his senior year, which mentioned resolving military service issues, he applied without hesitation. The backbone of Samsung Semiconductor's rise was also the military service exemption personnel assigned to the Giheung Research Center and Giheung Plant in the 1980s. If military service exemptions for specific fields raise fairness concerns, a system like Israel's, where military service does not interrupt career experience by allowing related research within the military unit, could be considered.

Third, the National Assembly must change. Instead of opposing additional tax support measures for semiconductor facility investments (amendments to the Restriction of Special Taxation Act) as preferential treatment for conglomerates, the National Assembly should become inclusive to foster innovation and creativity. The US electric vehicle company Tesla, regarded as a symbol of innovation, was able to grow based on loans supported by clean industry promotion policies during President Barack Obama's administration. As Mariana Mazzucato, a public economist at University College London (UCL), said, "The government must be a co-founder driving market innovation," the National Assembly should also become a co-founder of the market. Failure by the legislature, which holds legislative power, can lead to more severe consequences than market failure. If the future of the semiconductor industry cannot be guaranteed, talents will turn their backs.