Korea requires more fabless software developers to support its semiconductor industry.
The South Korean government’s proposal to establish a state-funded contract chipmaker, tentatively named Korea Semiconductor Manufacturing Company (KSMC), highlights a strategic and proactive approach to boosting the country’s semiconductor industry, as The Korea Biz Wire reported. While Samsung dominates the regional chip market, the government’s eagerness to create another foundry, despite the hefty financial investment required, is driven by several compelling factors.
First, enhancing the supply chain is critical in today’s volatile global environment. By diversifying production capabilities into multiple sites, South Korea can reduce reliance on any single entity, thus safeguarding against potential supply disruptions. Second, the exponential growth in semiconductor demand spurred by innovations in AI, 5G technology, and IoT—necessitates additional manufacturing capacity. KSMC could play a crucial role in meeting this burgeoning need.
Speaking of the investment and funding, Ahn Ki-hyun of the Semiconductor Industry Association estimated that investing KRW 20 trillion ($13.9 billion) in KSMC could yield KRW 300 trillion ($208.7 billion) by 2045. However, questions remain about whether $13.9 billion is sufficient to establish a viable chipmaker and whether a public corporation like KSMC could achieve technological advancements and secure enough client orders to be profitable. Additionally, Korea requires more fabless software developers to support its semiconductor industry.
The KSMC initiative aims to tackle structural weaknesses in Korea’s semiconductor industry, including an over-reliance on Samsung’s sub-10nm advanced nodes and a lack of mature process technologies. Smaller system semiconductor firms face challenges due to Korea’s limited manufacturing diversity, unlike Taiwan, where companies like UMC and PSMC, specializing in mature and speciality nodes, complement TSMC’s advanced process capabilities.
Korea is the world’s top memory chip producer but trails Taiwan in logic process technologies and chip design, with prospects worsening. Key challenges include a widening technological gap with competitors, low investment appeal, stagnant fabless company growth, talent shortages, and strict regulations. Addressing these issues is vital for Korea to regain its competitive edge in the semiconductor industry.
