[The Editors' Verdict] It's Too Soon to Celebrate the Semiconductor Recovery

"The semiconductor market is recovering."

South Korea, having confirmed the first-quarter earnings recovery of semiconductor giants Samsung Electronics and SK Hynix, is celebrating with optimism that the semiconductor market is reviving. The Korea Development Institute (KDI), a government-affiliated research institute, has raised its economic growth forecast for this year by 0.4 percentage points to 2.6%. This is based on the judgment that the Korean economy is gradually entering a recovery phase, supported by a rebound in exports centered on semiconductors.

In the securities industry, earnings expectations for Samsung Electronics and SK Hynix in the second quarter are being revised upward. Samsung Electronics’ operating profit forecast for the second quarter has risen about 7% over the past month, and SK Hynix’s forecast has been completely "refreshed" from 2.9 trillion won to 4.4 trillion won. As the memory semiconductor market shows signs of recovery, Samsung Electronics and SK Hynix are significantly increasing the supply of high-bandwidth memory (HBM), a core product for artificial intelligence (AI) semiconductors, raising expectations that their positions as the "top two" in the global advanced memory semiconductor market will be further strengthened.

When the memory semiconductor market sharply froze last year, the strategy of focusing on developing and producing high-value-added products like HBM to prepare early for the opening of the AI semiconductor market is considered one of the Korean semiconductor industry's successful crisis responses. Korea’s swift strategy justifies its reputation as the undisputed world leader in memory semiconductor production.

However, thinking coldly, this also means that it has become more difficult for Korea, a memory powerhouse, to compensate for its weaknesses in the non-memory sector. It is similar to a student who scored 90 in Korean, 80 in English, 70 in math, and 60 in science, who managed to raise the temporarily dropped Korean score to maintain the average but whose weakest science score remains stagnant.

While we are celebrating the semiconductor recovery, external voices continue to issue warnings about Korea’s semiconductor ecosystem.

Bloomberg found the reason behind Taiwan surpassing South Korea’s stock market capitalization and widening the gap between the two markets to the largest in 21 years in Taiwan’s more diverse AI chip ecosystem. Unlike Korea, where Samsung Electronics and SK Hynix dominate the memory semiconductor sector, Taiwan, led by TSMC, boasts a complete AI semiconductor supply chain ecosystem from fabless (semiconductor design) to foundry (semiconductor contract manufacturing), which was highly praised.

Similar warnings can be found in a semiconductor report released this month by the Semiconductor Industry Association (SIA) and Boston Consulting Group (BCG). The report predicts that by 2032, Korea’s share of global semiconductor production capacity will be 19%, ranking second in the world ahead of Taiwan (17%) and the United States (14%). This reflects Samsung Electronics and SK Hynix’s combined market share of over half in the global NAND flash and DRAM markets.

However, the report forecasts that Korea’s share of advanced process semiconductors below 10 nm (1 nm = one billionth of a meter) will sharply decline from 31% to 9%, falling behind Taiwan (47%) and the United States (28%). Currently, Samsung Electronics holds a significant share in the sub-10 nm foundry market, second only to Taiwan’s TSMC, but with the United States emerging as a new player, Korea’s share is expected to decline further.

It is urgent for Korea to look beyond the memory semiconductor market, which is highly sensitive to economic cycles. While we are celebrating the semiconductor recovery now, if we continue to focus only on what we do well, we cannot predict when we might face another long and dark tunnel.