The US is attracting fabs domestically and supporting the construction of fabs in allies.
China's goal of achieving semiconductor independence by 2030 is not easy.
Japan aims to regain its 1980s semiconductor competitiveness through small and medium-sized businesses.


Amidst the overall semiconductor supply instability, starting with automotive semiconductors, Western countries are moving to internalize semiconductor production, previously outsourced to Taiwan and South Korea. The United States, in particular, is actively courting foundry companies like TSMC and Samsung Electronics to attract their fabs to its shores. Furthermore, the United States continues its containment of China.

The conflict between the United States and China is spreading across all fronts, encompassing diplomacy and security, values and ideology, as well as economic and technological issues centered around semiconductors, the core of digital civilization.

Unlike former President Donald Trump, who confronted China one-on-one, US President Joe Biden is gathering allies to encircle and pressure China. The US, along with the EU and others, announced sanctions against China, citing human rights issues, and also held the Quad summit, a US-led security consultative body aimed at containing China. The Quad included Japan, India, and Australia.

In February 2021, President Biden signed an executive order excluding China from global raw materials supply chains. Since then, the United States has been increasing pressure on Huawei and other companies to curb China's rise in the semiconductor industry. The US government is currently discussing a $2.25 trillion (approximately 2,500 trillion won) super infrastructure investment plan, which includes a $50 billion (approximately 56 trillion won) funding package for the establishment of semiconductor technology divisions.

◇ The US is also trying to disrupt semiconductor production lines near China.

China is striving to improve its semiconductor supply capacity, which currently stands at a mere 14%. The establishment of a semiconductor college at Tsinghua University, China's most prestigious university, is part of this effort. The Chinese government is continuing its plan to elevate China's semiconductor industry to a world-class level by 2030 and to position some companies among the leaders.

Meanwhile, Karl Song, Huawei's President of Global External Cooperation and Communications, blamed the recent semiconductor shortage on US sanctions against the company on the 12th. He argued that other Chinese companies, seeing the sanctions against Huawei, began hoarding semiconductors, resulting in the shortage. Chinese companies are experiencing ongoing anxiety.

The United States is expected to encourage companies with advanced semiconductor process technologies, such as Taiwan and South Korea, to invest in new production facilities in the United States, thereby expanding the competitiveness of its semiconductor value chain and countering China. The US and Europe are pursuing a strategy of establishing domestically-focused production infrastructure hubs in the global semiconductor market. They are exploring ways to build a supply chain through actual semiconductor production, moving beyond the existing fabless-centric design focus.

Additionally, the United States is pursuing the decentralization of semiconductor production lines closer to China. Intel plans to invest $200 million (approximately KRW 223 billion) to establish a semiconductor R&D center in Israel and $10 billion (approximately KRW 11 trillion) to build a new fab. China is also actively developing semiconductor technology and building and attracting domestic fabs. TSMC plans to invest $2.8 billion (approximately KRW 3 trillion) to expand its 28nm (nanometer) semiconductor line in Nanjing, China. However, unlike attracting fabs, construction is expected to be challenging due to the United States' substantial holdings of core semiconductor technologies.

◇ Japan dreams of commercializing its semiconductor subcontractor competitiveness.

In the 1980s, Japan emerged as a leader in industrial computers and server memory. By 1988, it held a 50.3% share of the global semiconductor market. However, the market's focus shifted to PC CPUs in the 1990s and mobile APs in the 2000s. Japan fell behind rivals like Samsung Electronics and SK Hynix in the memory race, and its global semiconductor market share plummeted by a fifth to 10% in 2019. The number of top 10 semiconductor companies also shrank from six to one.

Nevertheless, it still wields significant influence in the semiconductor equipment and materials sectors. Tokyo Electron is the world's third-largest front-end equipment manufacturer, following Applied Materials of the United States and ASML of the Netherlands. In the silicon wafer sector, Shin-Etsu Chemical and Sumco hold a combined 60% of the global market share, while JSR and Tokyo Ohka Industries command an overwhelming 90% share of the photoresist materials market.

In March, Japan's Ministry of Economy, Trade and Industry announced the establishment of a public-private joint venture to reorganize and expand Japan's advanced semiconductor production system in order to reduce the semiconductor industry's dependence on foreign countries.

Canon, Tokyo Electron, and Screen announced a collaboration with the National Institute of Advanced Industrial Science and Technology (AIST) to develop advanced semiconductors. The Ministry of Economy, Trade and Industry (METI) plans to provide approximately 42 billion yen (approximately 430.3 billion won) in support of this plan and its implementation. The three companies will cooperate in developing technologies related to the entire process of creating circuits on a substrate, and the National Institute of Advanced Industrial Science and Technology will connect this with product commercialization.

In April, at a summit with the United States, the Japanese government agreed to strengthen supply chains and engage in joint research in advanced digital fields, including 5G, 6G, AI, semiconductors, and quantum computing, building on the bilateral partnership. On the 3rd, the government also requested the creation of executive positions in charge of economic security at companies in sectors such as semiconductors, telecommunications, IT, and nuclear power. This move is interpreted as a move to prevent technology outflows from Japanese companies amidst the deepening US-China conflict and secure a supply chain independent of China.

In addition, we are also considering establishing a consultation channel on economic security within this year with the participation of relevant ministries, including the National Security Agency and the Ministry of Economy, Trade and Industry, and major organizations, such as the Federation of Economic Organizations.

The COVID-19 pandemic and the intensifying US-China conflict are fueling a global competition for semiconductor independence and leadership. Japan, too, is actively expressing its desire to regain its former status, following the US lead. The Korean government and businesses should also continuously monitor the current situation and devise practical measures to strengthen the domestic semiconductor industry ecosystem.