The 'Yangtze Crocodile' was originally a nickname for Alibaba Group, China's largest e-commerce company.

This term was coined in the early 2000s when Alibaba's Taobao and the US-based eBay were fiercely competing for the Chinese market. It's derived from Alibaba's Chairman Jack Ma's remark that while eBay is the "shark of the sea," Alibaba is the "crocodile of the Yangtze River." The implication is that while sharks may be invincible in the ocean, crocodiles can outcompete sharks in rivers. As everyone knows, the crocodiles won, and eBay lost in China.

The Yangtze crocodile no longer refers solely to Alibaba. This Chinese crocodile, which devoured sharks, is poised to devour smartphones, TVs, and displays, as well as the symbol of cutting-edge industry: semiconductors. When did the Yangtze crocodile become such a fearsome entity, devouring anything it could find?

Now that I think about it, a scene I once saw in Animal Kingdom came to mind: a crocodile curled up in a swamp, suddenly leaping up at a herbivore coming to drink. The moment it jumped out of the water, the crocodile was no longer one of those giant reptiles crawling lazily through the swamp.

China aims to raise 110 trillion won in semiconductor production over the next five years, boosting its semiconductor self-sufficiency rate to 50%.

Looking at the recent movements of the Chinese semiconductor industry, it's impossible to shake the feeling that it resembles a crocodile crouching in a swamp, waiting for its prey. They have patiently waited, waiting to prey upon unsuspecting prey. From a simple display module a decade ago to today's rise to become one of the world's largest LCD producers, and from China's powerful expansion of LED supply to its global dominance, both demonstrate the resilience of a long period of crouching. More and more examples are emerging that prove China's rise wasn't a one-night stand.

▲China's move toward SSDs has already begun. Chinese capital is behind Western Digital's acquisition of SanDisk.
The photo shows an image of a Samsung SSD on display at the exhibition hall.

China's rise extends beyond the projection that its large-scale LCD production capacity will surpass Korea's in 2017 and its small- to medium-sized LCD production capacity will surpass Japan's in 2016. Ultimately, it extends to the semiconductor industry. The global semiconductor market in 2015 was estimated to be approximately $343 billion, with China's semiconductor consumption projected to exceed $210 billion. In contrast, China's semiconductor self-sufficiency rate stands at a mere 11.7%, which is the driving force behind its semiconductor ambitions. The Chinese government plans to raise its semiconductor self-sufficiency rate to 50% by allocating 110 trillion won over five years to foster the industry.

China's semiconductor development strategy is also clearly evident in its M&A activities. Western Digital (the world's leading HDD company) acquired SanDisk (the world's third-largest NAND flash memory company), which had been in a joint venture with Toshiba. Tsinghua Holdings, a Chinese company, invested in Western Digital and became its largest shareholder. These moves are aligned with the forecast that SSD notebook demand will surpass HDD notebook demand in 2016.

China's entry into the memory industry is a direct blow to the domestic semiconductor industry's crisis. Following the successful completion of the SanDisk acquisition, the scenario of expanding the memory industry through acquisitions or strategic alliances with Taiwanese DRAM companies is steadily becoming a reality. The potential acquisitions of Micron and Toshiba's NAND business by Chinese companies are the biggest and most dangerous variables for the memory industry. This is not simply a corporate merger or acquisition, but rather a war of nerves between nations, as it threatens to shift the hegemony of the global semiconductor industry.

If we invest in next-generation technology, will we be unable to catch up with China?

So how can we win the battle against the Yangtze River crocodile? Experts say we need to strengthen our competitiveness in DRAM by adopting finer processes like 18nm, and invest in 48- and 64-layer 3D NAND memory. In other words, they emphasize the need to invest in next-generation memory processes to win the competition with China. However, we must not forget that the gap that can be built with money (investment) can be narrowed with money. It's clear as day that China, with its wealth and will (as a semiconductor powerhouse), will seek to narrow the technological gap in any way possible.

With China's IT expansion gaining traction, the threat of a devastating crisis in semiconductors, long considered a lucrative export item, within the next five to ten years is becoming a warning, not a forecast. With this red flag flashing for the semiconductor industry, how are we responding? Even at a time when we need to invest every penny in the industry, we're hearing reports that budgets are disappearing. The fact that the Ministry of Trade, Industry and Energy's new R&D budget for next year is zero (0) makes us wonder if we're mistaking this "warning light" for a "celebration light."

On the 10th, the National Assembly held a forum on new growth industries to assess the semiconductor industry crisis and address response strategies. The forum was reportedly formed by lawmakers to "strengthen the competitiveness of technology-intensive industries and small and medium-sized enterprises (SMEs) and improve systems to foster and create new industries." However, it's unclear how much of a role semiconductors play in these numerous new growth sectors.

Several busy lawmakers attended, and the usual topics of investment and workforce development, which invariably appear in discussions of the semiconductor industry, resurfaced. While the meeting wasn't intended to be a discussion about immediate action or a conclusion, it felt like a perfunctory reiteration of the crisis "diagnosis." That bitter feeling was no different from a vague sense of fear. The fangs of a crocodile suddenly appearing and grabbing our legs as we leisurely drank from the water near the shore. The reality was staring us in the face: we should no longer disparage Chinese products simply because they're Chinese, but rather fear them simply because they're Chinese. There's nothing more foolish than hoping for mercy from the Yangtze River crocodiles.