A recent analysis predicts that by 2032 the United States will triple its semiconductor production capacity, capturing 14% of the global supply chain. The surge, primarily driven by massive subsidies, will significantly increase the share of sub-10-nanometer (nm) advanced semiconductor production from 0% in 2022 to 28% in just 10 years. During the same period, South Korea’s share in advanced semiconductor production is projected to shrink from 31% to 9%, causing considerable concern in the domestic industry.

According to a report titled “Strengthening the Global Semiconductor Supply Chain in an Uncertain Era” released on May 8 (local time) by the Semiconductor Industry Association (SIA) and Boston Consulting Group (BCG), advanced semiconductors below 10 nm were exclusively produced in South Korea and Taiwan in 2022. However, by 2032, 44% of these advanced chips will be manufactured outside of South Korea and Taiwan. Advanced semiconductors are critical components used in data centers (IDCs), smartphones, and artificial intelligence (AI) devices. The report noted, “As approximately 70% of future advanced technologies will rely on semiconductors made with sub-10-nm technology, the cost of producing these advanced chips will increase significantly.”

The report also stated, “The private sector is expected to invest about US$2.3 trillion in wafer manufacturing between 2024 and 2032, following the passage of the U.S. CHIPS Act in 2022,” and contrasted this with the US$720 billion invested in the previous decade (2013-2022).

The CHIPS Act, enacted in 2022, provides a total of US$52 billion in support for semiconductor manufacturing companies investing in the U.S., including US$39 billion in direct subsidies and a 25% investment tax credit (ITC). Government subsidies have influenced investment decisions by semiconductor companies. The report highlighted, “By 2032, U.S. semiconductor fabs will increase threefold, representing the largest growth globally, and increase the share of U.S. fabs in global production from the current 10% to 14%.” Without the CHIPS Act, the U.S. share of global fabs would have dropped to 8% by 2032.

Currently, the global semiconductor supply chain is specialized into distinct segments: design, key intellectual property (IP), and electronic design automation (EDA) are led by the U.S.; equipment is dominated by the U.S., the European Union (EU), and Japan; advanced semiconductor manufacturing is concentrated in Taiwan and South Korea; and assembly, testing, and packaging (ATP) are primarily handled by China and Taiwan. The SIA predicts that the CHIPS Act will “restore” the supply chain, ensuring that each region will handle a fair share of different manufacturing processes.

Significant changes are expected in advanced semiconductor manufacturing, which is South Korea’s core strength. The report emphasized, “In 2022, the U.S. produced almost no advanced semiconductors below 10 nm, but by 2032, it will manufacture nearly 30%.” Europe and Japan are also expected to produce around 12%. These shifts will severely impact South Korea, reducing its share in advanced semiconductor production from 31% to 9% during the same period. Taiwan’s share is also projected to decline from 69% to 47%.

Even in 2032, South Korea is expected to maintain its edge in memory sectors such as DRAM (from 52% to 57%) and NAND (from 30% to 42%), while maintaining similar levels in the 10-28 nm (from 4% to 6%) and 28 nm and above (from 5% to 5%) segments. In terms of comprehensive semiconductor production capability, South Korea’s market share will increase slightly from 17% in 2022 to 19% in 2032, making it the second-largest producer behind China (21% in 2032). However, South Korea will lose its competitive edge in advanced processing, a high-value-added sector, while maintaining dominance solely in the highly volatile memory segment.

The report also included a warning: if the subsidy competition among major countries leads to an imbalance in semiconductor supply and demand, it could affect the generic semiconductor market where South Korea has some competitiveness, leading to price declines.