Invest KOREA

In 2023, the global semiconductor market recession hit Korean semiconductor exports hard in the first half of the year. However, exports recovered in the second half of the year as unit prices of memory semiconductors stabilized after Samsung Electronics and SK Hynix decided to cut production and reduce supply. Since January this year, the Korean semiconductor industry exported more than USD 10 billion each month, with cumulative exports up to August reaching USD 88.8 billion. The record is close to the all-time high of USD 91 billion in 2022, and there is a strong possibility that the annual export value will reach a new high. The current export performance alone suggests that the Korean semiconductor industry is in a boom period.

Since the birth of semiconductors, the global semiconductor market continued growing, despite some bumps along the way. The growth was driven by the rise in the number of devices that use semiconductors and the increasing amount of semiconductor capacity used. The events that triggered an explosive growth in semiconductor demands include the emergency of personal computers in the 1980s, the birth of smartphones in the late 2000s, and the expansion of data center servers in the mid-2010s, AI is the next sector leading the semiconductor market of late. While AI technology itself is not a new concept, generative AI, hailed as the next booming technology since late last year, is driving the demand for semiconductors needed to implement the technology.

Memory semiconductors as well as system semiconductors are crucial components needed for running computers, smartphones and servers and power AI. Therefore, Korea plays a critical role in the global semiconductor market as it accounts for 61.0% of the global memory semiconductor market (OMDIA 2024). In particular, Korean companies supply more than 90% of the world's demand for high bandwidth memory (HBM), which has been experiencing a surge in demand in recent years (TrendForce 2024). It is expected that Korea's influence in the global semiconductor market will not weaken going forward. As the world's leading supplier of memory semiconductors, Korea is expected to continue exporting more as demand increases in the global market.

However, the recent policies of major countries that have experienced global semiconductor supply shortages since the COVID-19 pandemic posed a threat to the Korean semiconductor industry. The current global semiconductor supply chain was built over a long period of time in a direction that can fully utilize the core competencies of each country and maximize profit and efficiency in the semiconductor production process. However, the existing supply chain is now being reorganized as countries seek to stabilize the supply chain and achieve national economy security by attracting semiconductor production plants in their soil and reduce their dependence on foreign countries. The trend, if intensified, could lead to fierce competition in the memory semiconductor market, where Korea has a dominant position.

In response to these changes in the external environment, the Korean government announced plans to build the "world's largest and best semiconductor mega cluster" at a public discussion in January 2024. The semiconductor mega cluster will be introduced in an area in southern Gyeonggi Province bustling with semiconductor companies and related organizations. The government is aiming to build the biggest mega cluster of its kind, covering an area of 21 million square meters and producing 7.7 million wafers monthly by 2030. The project is based on the assessment that Korea needs not just the technologies but also economies of scale to champion the global semiconductor market. In May, the Korean government announced the "Comprehensive Plan to Support the Semiconductor Ecosystem". Under the plan, the government will provide an additional KRW 26 trillion to support the semiconductor sector (by providing various tax, financial and fiscal benefits) across the entire semiconductor ecosystem to make the nation’s semiconductor industry more competitive.

More global makers of materials, parts and equipment are entering the Korean market after the Korean government announced plans to build the semiconductor mega cluster and better support the semiconductor ecosystem. Late last year, global semiconductor equipment producer Lam Research announced plans to expand its semiconductor R&D facility in Yongin, Gyeonggi-do, while Dutch equipment maker ASML purchased land in Hwaseong, Gyeonggi-do, earlier this year to build an R&D facility for manufacturing next-generation extreme ultraviolet (EUV) lithography equipment in Korea. Tokyo Electron (TEL), Japan's No. 1 semiconductor equipment maker, is building its fourth R&D center in Yongin, Gyeonggi-do, with the aim of launching operation in 2026. The presence of global semiconductor manufacturing equipment companies is expected to strengthen the local semiconductor industry ecosystem and help maintain competitiveness.