Korea must act as US, Japan go all out to bolster chip industries

The United States and Japan are swiftly enhancing their semiconductor industries, prompting heightened vigilance among domestic stakeholders. For starters, Intel of the U.S. unveiled an ambitious plan Thursday to embark on the mass production of 1.8 nanometer chips from late this year to become the world’s second-largest foundry maker, outpacing Samsung Electronics.

U.S. Secretary of Commerce Gina Raimondo cited the need to legislate a second CHIPS Act if the U.S. wants to “lead the world” in the chip field. “Intel is an American champion and has a very huge role to play in this revitalization,” she said during an Intel foundry event. The Commerce Department has yet to disclose details of the $52 billion funding package. But industry sources say Intel will likely get a considerable portion, even up to $10 billion. This means the Joe Biden administration is poised to provide significant support for Intel to bolster the semiconductor industry
for the sake of “economic security” amid rapid transition toward AI that requires an explosive increase in chip supply.

Japan, for its part, has also been gearing up to boost its own semiconductor industry in a bid to revive its past glory as the world’s largest chip producing hub. The Japanese government has invested 10.7 trillion won ($8.03 billion) to build two semiconductor plants, one in Kumamoto and the other in Kyushu. This move aims to attract investments from TSMC of Taiwan. In order to provide the necessary land, Japan lifted its 50-year-old greenbelt ban. The factory in Kumamoto commenced operations on Saturday, approximately 22 months after the 24-hour construction project began.

Fueled by the global AI surge and the strong performance of semiconductor giant Nvidia, the U.S. stock market soared to its highest level, reaching a staggering 39,000 points, closely followed by Japan, whose stock market surged to a 34-year record.

In stark contrast, Korea has faced considerable challenges. Various re
gulations have hindered efforts by businesses to expand investments. SK hynix, for instance, has encountered setbacks in its endeavor to establish a chip cluster in Yongin, Gyeonggi Province. Although the location was initially chosen in 2019, progress has been slow in terms of land compensation and the provision of essential utilities like tap water and electricity. After a prolonged delay, production under the plan is now slated to commence in 2027.

In this context, the main opposition Democratic Party of Korea (DPK) cannot avoid criticism for having opposed plans to provide major firms with tax incentives. The enterprises could not have benefited from any government incentives as seen in the U.S.

The anticipated plan by the U.S. administration to allocate a substantial portion of incentives to Intel is poised to have a significant impact, potentially leaving domestic companies like Samsung and SK hynix reeling. This is particularly concerning as both Samsung and SK hynix have plans to invest in the U.S.
Intel CEO Patrick P. Gelsinger even called for measures to enable the U.S. and European companies to produce 50 percent of the semiconductors within the next 10 years. Currently, Asian countries account for 80 percent of global chip production. Microsoft has recently disclosed that it entered into a contract with Intel for the supply of 1.8nm chips. The U.S. administration has been providing enormous assistance to U.S. chipmakers. It decided to offer a $1.5 billion subsidy to GlobalFoundries.

Given this, Samsung Electronics has decided to enhance its competitive edge in manufacturing 3nm chips through a collaboration with Arm, a powerhouse U.K. intellectual property firm. The semiconductor war has already evolved into an unyielding international competition that transcends mere rivalry among individual enterprises. The global chip market is undergoing a profound transformation with the rise of AI, highlighting the need for dominant technology players to lead the sector. Bold government support has become ess
ential in achieving this, coupled with businesses making audacious investments.

The Yoon Suk Yeol administration and domestic chip companies, alike, should feel a sense of urgency with the opening of TSMC’s Kumamoto factory. If Korea hesitates, it may lag far behind the U.S. and Japan, as they are now making all out efforts to sharpen the competitiveness of their semiconductor industries with their governments initiating the moves. Meanwhile, the Korean government remains inactive.

Source: Yonhap News Agency