As South Korea's semiconductor market share in China has plummeted following U.S. semiconductor supply restrictions, opinions have been raised within the new government that it is urgent to strengthen corporate support, including R&D investment, to maintain Korea's semiconductor super-gap.

The Federation of Korean Industries announced on the 25th that, following the US semiconductor supply restrictions imposed in 2019 on Huawei and SMIC—key pillars of China's semiconductor ambitions—it analyzed changes in market share for Chinese semiconductor imports by major countries and regions including Taiwan, Korea, ASEAN 6 (Vietnam, Singapore, Thailand, Philippines, Malaysia, Indonesia), Japan, and the US. The results showed that compared to 2018, Taiwan's market share increased by 4.4%p and Japan's by 1.8%p in 2021, while Korea's market share decreased by 5.5%p.




In 2021, China's semiconductor imports increased by 37.2% compared to 2018, the year immediately preceding the start of U.S. semiconductor supply restrictions against China, while semiconductor imports from Taiwan and Japan increased by 57.4% and 34.8%, respectively.

The increase in China's semiconductor imports from Taiwan is due to U.S. sanctions This is analyzed as a result of Chinese domestic companies and foreign-invested enterprises in China increasing imports of Taiwanese semiconductor chips as their purchases of U.S. semiconductors were blocked.

In contrast, China's semiconductor imports from South Korea increased by only 6.5%, as China's imports of South Korean memory in 2021 decreased by 13.7% compared to 2018 due to the impact of Huawei's suspension of purchasing South Korean memory following US regulations and falling memory semiconductor prices.

On the other hand, China's imports of microcontrollers (Mc-Controller Units), which are key non-memory semiconductors for home appliances, and other semiconductors from Korea increased by 69.3% and 67.7%, respectively.

In 2021, China's semiconductor imports amounted to $468.6 billion, which is about 1.8 times its crude oil imports of $255 billion. Semiconductors are important to the Chinese economy, to the extent that China's share of global semiconductor demand in 2020, based on the location of production countries, reached 60%.

Against this backdrop, China declared its ambition to become a semiconductor powerhouse in 'Made in China 2025' in 2015 and mobilized its full national capabilities to achieve a semiconductor self-sufficiency rate of 40% by 2020 (70% by 2025), but the actual semiconductor self-sufficiency rate in 2020 was only 15.8%.

According to IC Insights, in 2020, most of the semiconductor integrated circuits (ICs) produced in China were manufactured by foreign companies operating in China, such as TSMC, SK Hynix, Samsung, Intel, and UMC, while the share of local Chinese companies was only 36.5%.

On the other hand, China's semiconductor industry in 2021 (based on semiconductor integrated circuits) continues to grow quantitatively, with sales increasing by 61.0% and production volume by 94.0% compared to 2018.

The U.S. semiconductor industry anticipates that over the next 10 years, China, through robust support from its central government, will [fall] behind global majors in the fields of advanced node foundry production, equipment, and materials, where the gap is significant.It is expected that the number of cars will decrease.

In fact, SMIC, China's number one foundry company, announced a new investment of $5 billion (approximately 6.16 trillion won) in February of this year to expand its semiconductor production capacity, and Huahong Semiconductor, the number two company, set out to raise approximately 15 billion yuan (approximately 2.9 trillion won) through a secondary listing on the Shanghai Stock Exchange to secure investment funds.

Kim Bong-man, Head of the International Division at the Federation of Korean Industries, said, “As major countries such as the United States, China, Europe, and Japan are mobilizing their national capabilities to accelerate the establishment of an independent semiconductor ecosystem and the restructuring of supply chains, the new government launching in May must strengthen policy support, such as R&D investment and tax benefits for semiconductor companies, to secure a global lead for K-semiconductors.”

In fact, among the top five global semiconductor companies with the highest proportion of government subsidies relative to sales among 21 companies from 2014 to 2018, three were Chinese companies (SMIC 6.6%, Huahong 5%, Tsinghua Unigroup 4%), and US semiconductor companies also received a significant amount of government subsidies (Micron 3.8%, Qualcomm 3%, Intel 2.2%), whereas Samsung Electronics and SK Hynix were only 0.8% and 0.5%, respectively.



Director Kim Bong-man stated, “In mid-April, the Transition Committee designated the ‘Support Measures for Securing a Super-Gap in Semiconductors’ as a national agenda item for the new government.“The decision to review this marks the first step toward securing a super-gap in K-semiconductors, and I look forward to the government rapidly promoting the inter-ministerial development of the system semiconductor industry and strengthening of the global supply chain cooperation system immediately upon its launch,” he said.