South Korea unveils plan to spend roughly $450 billion to build the world’s biggest chipmaking base over the next decade, joining China and the US in a global race to dominate the key technology.
Homegrown tech companies like Samsung Electronics and SK Hynix will lead with more than $1.44 billion of investment in semiconductor research and production in the coming years under a national blueprint devised by the country’s President Moon Jae-in’s administration. They’ll be among 153 companies supporting the effort, intended to protect the nation’s most economically crucial industry.
Global chip shortage
The investment comes at a time when the US, China and the European Union (EU) seek to increase their semiconductor capabilities after a global chip shortage exposed a reliance on just a handful of Asian manufacturers. The shortages are now spreading from autos to smartphones and displays, elevating semiconductors onto the agendas of governments from US to Belgium and China.
Chipmaking technology is fundamental to groundbreaking advances from artificial intelligence (AI) to autonomous vehicles and connected homes. Semiconductors account for the largest share of South Korea’s exports and chip exports are expected to double to $200 billion by 2030, the Ministry of Trade, Industry and Energy said.
The government seeks to build a “K-semiconductor belt” that stretches dozens of kilometers south of Seoul and brings together chip designers, manufacturers and suppliers, according to the ministry.
Samsung and Hynix make the majority of the world’s memory chips, basic semiconductors that handle storage for all devices. But one area South Korea has been lagging is in the ability to produce advanced logic chips that handle complex calculations for tasks like AI and data processing. This is a specialty dominated by Taiwan Semiconductor Manufacturing, which makes Apple’s iPhone processors. Samsung aims to compete more aggressively in this area, while Hynix too has announced ambitions to get into logic chips.
Incentives for the industry
The South Korean government will incentivize its domestic industry with tax breaks, lower interest rates, eased regulations and reinforced infrastructure, hoping to see its chipmakers catch up with the global leaders, the ministry said. The government will also secure adequate water supply for the next 10 years in the targeted region and reinforce power supplies, both essential to advanced chip making factories.
South Korea’s plans is similar to efforts underway around the world. American President Joe Biden wants to dedicate $50 billion to US semiconductor research and production, part of an overall ambition to safeguard America’s supply chains. Meanwhile, China has earmarked hundreds of billions of dollars toward developing its own chip making industry, to avoid reliance on Western-designed imports.