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Korean companies are leading the global market in semiconductors, displays, and batteries, but the supply chain remains as a challenge. In the era of global division of labor, the supply chain has become a thing of the past. As political issues such as Japan's export restrictions and technological hegemony battles such as the US-China dispute have become entangled, supply chain restructuring has become a new task to prepare for. Experts unanimously said, “It is urgent to create a solid collaboration ecosystem.” It is said that competitiveness can be secured only when efforts to strengthen the supply chain of demand companies such as semiconductor, display, and battery manufacturers as well as material, parts, and equipment companies are continuously made. They emphasized that legal and institutional support is also required to establish a virtuous cycle structure of 'Technology localization - Commercialization - Profit creation – Research and development(R&D) reinvestment'.

◇“Semiconductors, material, parts and equipment must stick together”

Sa-yoon Kang, president of The Korean Microelectronics and Packaging Society, suggested the formation of a consortium for Korean semiconductor, material, and equipment industries and the 'K-Semiconductor Package Development Center' as a plan for self-sufficiency in the semiconductor packaging supply chain. Packaging has been considered less important than previous processes such as exposure process, but recently its importance is growing as an alternative to improving semiconductor performance, which has reached its limit in miniaturization. President Kang explained that the technology gap should be quickly caught up with large-scale R&D support from the lead of government.

He picked foreign companies' early market dominance as the reason for our high dependence on imports of semiconductor packaging materials. He said, “Technical know-how and mass production experience accumulated over a long period of time as a global semiconductor company partner are acting as a high barrier to entry for Korean material companies.” The conservative movement of semiconductor companies to minimize material diversification is also a factor that makes it difficult for latecomers to catch up with the technological gap.

He diagnosed that in 2019, Japan's export regulations started the movement for localization of materials and was biased toward short-term results and the momentum was weakened. President Kang said, “The weak yen situation this year has had the opposite effect of increasing the proportion of overseas materials.”

In Japan, under government support, manufacturers form a 'Joint' consortium to share the latest information on semiconductor packages and closely cooperate in technology development. Showa Denko, a large material company, established 'Open Lab', a package center. Package tests and evaluations are conducted in the same environment as the actual fab. It is a strategy to provide total package solutions to semiconductor customers including TSMC.

On the other hand, Korean material makers do not have the conditions to produce new packages. It is not easy to invest in large-scale infrastructure for material property analysis·evaluation equipment for customers' processes. President Kang worried by saying, “If this situation continues, the technology gap will widen exponentially in the next-generation package market.” This means that if our industry is not prepared for the new technology, we will fall behind again.

President Kang emphasized that Korean semiconductor, material, and equipment companies should also form a consortium. He predicted, “In order for the Korean semiconductor industry to have a sustainable technological advantage, the base of material, parts and equipment companies must grow together. Preparing prompt response measures following the reorganization of the global semiconductor supply chain will be a watershed in securing national competitiveness.” He added that the K-semiconductor package development center, which has invested at least 200 billion KRW along with the formation of a consortium, should prepare a foundation for securing competitiveness.

◇“A small number of exclusive OLED materials must be go through localization with a Korean production system”

The center of gravity of domestic display is shifting from liquid crystal display (LCD) to organic light emitting diode (OLED). As the advancement of OLED technology is still in progress, the importance of materials is further highlighted. Sang-wook Nam, an associate researcher at the Korea Institute for Industrial Economics and Trade, emphasized, “In order to stabilize the display material supply chain, domestic production capacity must be increased.” This includes not only domestic companies but also global companies based in Korea.

Compared to LCD, OLED has a low self-sufficiency rate. Although the situation is better than that of semiconductors, global OLED material companies themselves are limited to a few countries. The United States and Japan are examples. This is the background that supply and demand can be limited at any time according to the rapidly changing international situation, therefore, thorough preparation for supply shortages is urgently needed.

Researcher Nam explained that OLED materials are characterized by a monopoly system for both supply and demand. In the case of semiconductors, there is a wide base of demand companies such as Taiwanese, Chinese, and Japanese semiconductor manufacturers. OLED is concentrated in a few companies including as Samsung Display and LG Display. Researcher Nam said, “There are only a handful of OLED material companies, so even the supply is monopolized.” He expressed his thought that as it is a special market, the supply chain strategy needs to be differentiated.

Researcher Nam suggested expanding domestic production bases as a response strategy. Another way is to establish a joint venture to attract global companies to their production bases in Korea. As OLED demand companies are limited to Korean companies, Japanese companies also suffered damage during the trade restriction between Korea and Japan. A representative example is the replacement of export-regulated items such as polyimide with other materials. There was also a series of moves to expand domestic factories to detour export restrictions.

In preparation for future display development, R&D for active next-generation material is also urgently needed. Researcher Nam said, “When the form factor changes, such as foldable and stretchable phones, the material must also change completely. As the supply chain is reorganized due to the emergence of a new form factor, there is much room for Korean material companies to increase the localization rate, so active investment from the government is needed.”

◇Battery material, parts, equipment urgently need to secure self-sufficiency… 'Joint R&D' system must be made

It is pointed out that the battery also needs 'self-sufficiency' above all else. It is difficult to escape from dependence on imports unless battery materials, parts, and equipment companies are backed by their own competitiveness. Si-joon Lee, CEO of Dongwha Electrolyte, emphasized, “This is a problem that can be solved not only by battery material companies, but also cooperation from domestic battery cell manufacturers and the government are needed.”

Domestic business sites of LG Energy Solution, Samsung SDI, and SK on are supplied with electrolytes not only from Korean materials companies but also from China. Electrolyte imported from China is subject to duty free. However, when Korean companies export to China, they are subject to tariffs. This is the so-called 'quota tariff' policy. It is an opportunity for Korean battery manufacturers to expand their profits. On the other hand, the damage to material, parts and equipment companies is great. This is because it can weaken the self-sustainability of Korean battery material makers by increasing the price competitiveness of imported goods. This may lead to a reduction in research and development (R&D) investment in the electrolyte·additive field. In the long run, it will lag behind the competition in the market.

Patents on additives that determine the performance of electrolytes have been monopolized by Japan. Dongwha Electrolyte overcame high entry barriers and succeeded in developing their own additives. The process wasn't easy either. This is because it is difficult for companies alone to secure performance and quality comparable to Japanese products. This is the reason CEO Lee suggested establishing a 'Joint R&D' ecosystem. In the case of additives, he emphasized the need for a comprehensive Industry-Academia-Research consortium of electrolyte producers, additive producers, and universities. Finally, he said, “We need a virtuous cycle structure in the final cell by the battery manufacturer for reliability, lifespan, performance, and verification process.”

By Staff Reporters Ji-woong Kim (, So-ra Park (, Yun-sub Song (