On Jan. 2, Kim Jae-gu, a professor of business administration at Myongji University in Seoul, emphasized the urgent need for South Korea to embark on large-scale talent cultivation and technology development in the semiconductor industry. This call to action comes amid growing concerns about South Korea’s ability to maintain its competitive edge in the global semiconductor market, particularly in advanced processes.
In 2000, American journalist Craig Addison highlighted the strategic importance of the semiconductor industry in his book “Silicon Shield,” suggesting that Taiwan’s semiconductor sector acts as a protective shield for the nation’s security. This concept underscores the critical role that semiconductor manufacturing plays in national defense and economic stability.
Fast forward to 2023, Taiwan has taken significant steps to bolster its semiconductor industry. The “Taiwan version of the CHIPS Act” was established, offering corporate tax credits of up to 25% for R&D investments. Samil PwC Management Research Institute evaluated this law as “the most aggressive level of government support in Taiwan’s history.” Additionally, Taiwan’s “Angstrom Semiconductor Plan,” initiated in 2020, provided NT$5.6 billion (about 250 billion won) in subsidies to companies developing ultra-fine processes at the angstrom level. In May last year, Taiwan further invested NT$11.4 billion (about 510 billion won) to attract R&D centers from tech giants NVIDIA and Micron.
Despite these advancements, South Korea’s semiconductor industry faces significant challenges. According to the Semiconductor Industry Association (SIA) and Boston Consulting Group (BCG), South Korea’s market share of advanced processes below 10nm is expected to drop from 31% in 2022 to 9% in 2032. This decline has raised alarms about the need for more robust government support and strategic investments.
The Science and Technology Policy Institute (STEPI) devised the “Silicon Shield Index” in 2023 to compare the semiconductor industries of South Korea and Taiwan. The index revealed that South Korea lagged behind Taiwan in all five categories, including advanced processes, product competitiveness, market dominance, sustainability, and ecosystem diversity. STEPI pointed out, “Our semiconductor industry suggests that there is an inherent concern about losing competitive advantage due to the lack of government investment strategy and a weak corporate ecosystem as the global semiconductor ecosystem evolves into a division of labor.”
In response to these concerns, the South Korean government announced the “Comprehensive Semiconductor Ecosystem Support Plan” in May, proposing financial, human resources, and infrastructure support measures worth 26 trillion won. However, the National Economic Advisory Council criticized this plan, stating, “It is focused on small fabless and equipment companies,” and “It is quite distant from the perspective of nurturing core companies.” They argued that support measures should be concentrated on mid-sized and large companies capable of surviving global competition.
Experts unanimously agree that South Korea needs bold semiconductor support measures from a national strategy perspective. Kim Jae-gu emphasized, “Even if it takes some time and there are difficult periods, the only way for South Korea to survive is to firmly remain in the semiconductor supply chain through the recovery of competitiveness.”
The National Economic Advisory Council also advised that South Korea needs large-scale government investment in future advanced industries such as artificial intelligence (AI), robots, and quantum computers. They noted, “South Korea has a lower possibility of receiving global private investment in AI compared to the UK, Israel, Canada, and Germany,” and “Large-scale government investment is needed to fill the gap in private investment.” They also highlighted the need for a coordination system among ministries for policy adjustment, global AI standard setting, and the establishment of national AI guidelines.
Additionally, there are calls to support domestic IT conglomerates in creating a new industry innovation ecosystem by linking talent cultivation measures and easing regulations on corporate venture capital (CVC). Lee Young-dal, a visiting professor at the City University of New York, suggested, “CVC should be expanded and reorganized into specialized industrial innovation companies, allowing them to engage in private equity (PE) and take on roles in industrial education and research,” and “An industrial postdoctoral system that links postdoctoral programs with startups, technology transfer, and industry-academia cooperation should also be established.”
In the global market, South Korea remains a significant semiconductor supplier. According to the Glocal New Industry Innovation Ecosystem Research Team, South Korea’s revenue share among major global semiconductor listed companies is 25%, ranking second after the United States (46%). As of the third quarter of last year, Samsung Electronics and SK Hynix accounted for 75.5% of the global DRAM market.
The importance of the semiconductor industry cannot be overstated. Semiconductors are critical components in a wide range of electronic devices, driving economic growth and innovation. As the global semiconductor ecosystem evolves, South Korea must take decisive action to maintain its competitive edge and secure its position in the global supply chain.
