GlobalData analysis forecast
“China obtained self-sustaining semiconductor ability,
and South Korea will get less opportunities”
US requesting confirmation of joining the alliance within this month
There are voices saying that joining the semiconductor alliance ‘Chip 4’ proposed by the US would be advantageous for South Korea in the long term. This is because as China has developed semiconductor self-sustainability, opportunities in the Chinese market are expected to gradually decrease.
According to Josep Barley, a researcher at a global market analysis company GlobalData, “Considering that China is actively expanding their semiconductor self-sustainability rate, the opportunity for South Korea to secure or maintain market share of the semiconductor in China will decrease over time.” Since Chinese semiconductor sales are expected to decrease, it is predicted that South Korea will eventually join Chip 4 Alliance. Chip 4 Alliance is a semiconductor cooperation within countries proposed by the United States. The goal of the US is to build a semiconductor supply chain that will check China, which includes Japan, Taiwan, and Korea. The US is requesting South Korea to confirm its membership within August.
China is concerned about South Korea joining the Chip 4 Alliance, because the purpose is very clear, to keep in check with China. They have already warned several times that it could lose the Chinese market. The Global Times affiliated with the People's Daily, the official newspaper of the Communist Party of China, is strongly claiming that South Korea joining the Chip 4 Alliance would be "commercial suicide." It is known that 30% of the sales of Samsung Electronics and SK Hynix are from China. This means that they are highly dependent on China.
GlobalData predicted that the status of Korean semiconductors in China would gradually weaken. This is because large-scale investments are being made to expand semiconductor production capacity in China. In 2014, 138.7 billion CNY (about 26 trillion KRW) was invested as the 1st semiconductor fund through the ‘Promotion of the National integrated circuit (IC) Industry Development’. The main purpose is to improve semiconductor design capabilities and secure production plant (fab). In 2019, the 2nd fund of 200 billion CNY (about 38 trillion KRW) is being invested in semiconductor materials, parts, and equipment. According to market research firm TrendForce, in the first quarter of last year, China's semiconductor contract manufacturing (foundry) market share exceeded 10% for the first time.
If China increases its semiconductor self-sustainability rate, the export opportunities for Korean companies will inevitably decrease. Although Samsung Electronics and SK Hynix also produce semiconductors in China, fierce competition with Chinese companies is inevitable. Semiconductor materials, parts, and equipment companies that benefit from China's investment in semiconductor facilities are also highly likely to lose market opportunities in the long term. Researcher Barley said, "South Korea will have to maintain the same distance (between China and the United States) in the short term, but they will work through the situation in a closer relationship with the United States in the long term."
By Staff Reporter Dong-jun Kwon (firstname.lastname@example.org)