Since the Japanese Government imposed trade restrictions on key semiconductor materials in July last year, South Korea’s major semiconductor companies had held meetings with their respective presidents as the chair almost daily. These meetings were emergency board meetings in order to inspect the current status of supply and demand and production of materials that were imposed with restrictions and to come up with countermeasures. Management teams had acted with much pressure on their shoulders as they had even checked the situation of supplies that were coming in through the Pacific. Although these companies were able to dodge critical situations as they had focused all of their abilities into overcoming the crisis, they truly felt the importance to diversify supply and demand of important materials. “While reduction in production cost was the reason why companies wanted to diversify supply and demand of materials, components, and equipment in the past, diversification of supply and demand now has become a task that will determine a company’s existence.” This desperation is now acting as a driving force that is changing the ecosystem of South Korea’s semiconductor industry.
South Korea’s semiconductor industry has seized a golden opportunity to take one more step forward. As Samsung Electronics and SK Hynix looked to diversify supply and demand of materials, components, and equipment when the Japanese Government imposed restrictions, there have been many cases where foreign companies building plants in South Korea or moving their production bases to South Korea.
As South Korea becomes a country that has successfully defended the spread of COVID-19 while foreign companies have been looking to invest in the South Korean market, there is a possibility that South Korea will emerge as the center of the global value chain (GVC) of the global semiconductor industry. As the semiconductor industry has grabbed an opportunity that it may never seize again, there have been people who believe that the South Korean Government needs to provide strategic support, ease regulations, and establish collaborative systems from various angles in order to attract foreign investments and to strengthen the industry.

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<Samsung Electronics’ Pyeongtaek Campus (Photo: Samsung Electronics) >

According to the industry, there have been movements by foreign semiconductor materials, components, and equipment makers that are trying to move their production bases to South Korea.
There is an increase in number of cases where these companies are either making investments in order to transfer products that had been manufactured in different countries such as Japan or China to South Korea or looking to make partnerships with South Korean companies that already have facilities and equipment set up.
In one case, a Japanese company has started making investments in facilities and equipment in order to manufacture photoresists from a plant in South Korea. In another case, a different Japanese company started manufacturing photoresists that had been manufactured from Japan in South Korea. There are also foreign companies that are looking to enter the South Korean market indirectly and prepare production bases in South Korea.
“We received requests from multiple Japanese companies about manufacturing their products from our plant.” said a representative for a medium-sized South Korean semiconductor materials maker.
Such change has recently started to come to the surface rapidly because Samsung Electronics and SK Hynix’s plans to stabilize supply and demand of materials, components, and equipment and strengthen their supply networks are starting to bear fruits.

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<Bird’s eye view of SK Hynix’s Icheon Campus (Photo: SK Hynix) >

According to the industry, Samsung Electronics and SK Hynix are aggressively pursuing reorganizing their supply networks. They are basically announcing that they will not purchase key materials and even raw materials that make up key materials if they are manufactured or produced from single country. They are requesting domestic production as the top priority and are asking companies to set up production bases in countries such as China and Taiwan that are nearby if they are unable to manufacture their products in South Korea.
This trend is taking place because there are mutual interests between Samsung Electronics and SK Hynix, which are world’s biggest memory makers that are looking to strengthen their supply networks, and materials, components, and equipment makers that are looking to secure stable customers. There are predictions that there will be a huge change to the landscape of the global semiconductor industry due to COVID-19 in addition to recent movements by Samsung Electronics and SK Hynix and materials, components, and equipment makers.
“Many foreign semiconductor materials makers work behind the scenes when they are looking to move their businesses to South Korea because they have to be conscious of their respective governments.” said a representative for a South Korean semiconductor materials maker. “Because companies are starting to move out of China due to COVID-19, the global semiconductor industry’s supply chain that is centered on South Korea will be very different in 3 to 5 years.”
Staff Reporter Yun, Geonil | benyun@etnews.com & Staff Reporter Kang, Hyeryung | kang@etnews.com & Staff Reporter Yun, Heeseok | pioneer@etnews.com