Enhancing 'SoBuJang' Competitiveness Key to Maintaining Semiconductor and Display Ultra-Gap

[Post-Corona Global Corporate Survival Strategy①]
Low Domestic Production Rate of Key Materials and Components... Still Dependent on Overseas Countries like Japan
Intensified Competition in Developing Process Equipment such as Displays

[Asia Economy Reporter Kim Hyewon] There is a growing consensus that to maintain a super-gap advantage in the semiconductor and display industries, which are the backbone of South Korea's economy, even in the post-COVID era, it is essential to drastically enhance competitiveness in the materials, parts, and equipment (SoBuJang) sector. The sudden imposition of Japanese export restrictions served as a major turning point, prompting South Korean companies to reorganize their global value chains (GVC) due to excessive dependence on a specific country. However, the domestic production ratio of core SoBuJang remains alarmingly low, and the industry still heavily relies on imports. Especially with the onset of COVID-19, the global trend toward regional bloc formation in supply chains and intensified competition to attract advanced industries domestically have led to the diagnosis that the future of South Korea's manufacturing hinges on a qualitative leap in SoBuJang, often described as the "technology within technology."

In July 2019, Japan targeted the semiconductor and display industries with export restrictions, which was possible because they had accurately identified vulnerabilities in South Korean companies. The Japanese government shook the foundation of South Korean manufacturing with just three materials: hydrogen fluoride, extreme ultraviolet (EUV) photoresist, and fluorinated polyimide. Kang Seok-gu, head of the Industrial Policy Team at the Korea Chamber of Commerce and Industry, pointed out, "Key materials in semiconductor and display processes in our industry still depend on advanced countries including Japan," adding, "It is necessary to break this weak link." Lee Geon-jae, a researcher at IBK Investment & Securities, also noted, "The overall self-reliance of the domestic SoBuJang industry remains poor," and "Specifically, the domestic display industry's self-supply level was 45% as of 2018, the second lowest among major sectors after semiconductors at 27%."

This year, the government budget related to SoBuJang was set at a total of 2.5611 trillion KRW, including technology development (1.8884 trillion KRW) and infrastructure establishment (281.3 billion KRW). The list of high value-added items urgently requiring localization has been expanded from 100 major items against Japan to 338 items globally, with concentrated support for research and development (R&D). Last year's budget was 2.0725 trillion KRW. Lim Kyung-seop, an official in charge of SoBuJang at the Ministry of Trade, Industry and Energy, stated, "We are providing multifaceted support such as test beds and mass production evaluations to ensure that R&D and technology efforts by small and medium-sized enterprises lead to actual business outcomes."

Experts agree that beyond the materials and parts that have relatively succeeded in localization since the Japanese export restrictions, attention must be paid to the intensifying global competition in developing next-generation semiconductor and display process equipment. A representative example reflecting the importance of equipment is Samsung Electronics Vice Chairman Lee Jae-yong's visit to the headquarters of Dutch company ASML, known as the 'super subcontractor' in the semiconductor equipment industry, last October despite COVID-19, to secure EUV equipment.

Professor Kwon Jang-hyuk of Kyung Hee University's Department of Information Display identified the development of new materials and equipment technologies as the core of the semiconductor and display industry's super-gap. Professor Kwon emphasized, "We pay royalties of 300 to 500 billion KRW annually to the U.S. for phosphorescent materials alone," adding, "We must secure competitiveness in materials and equipment centered on royalties and patents." He advised that for producing next-generation displays that can bend, fold, and stretch, it is time to focus on developing various equipment technologies such as transistors and wiring suited to these displays.

According to a research report obtained by this publication from the Korea Display Industry Association titled "Strategies to Strengthen Equipment Companies' Competitiveness through Analysis of Core Equipment Element Technologies," South Korean equipment companies are striving for localization through joint development with panel companies. However, key technologies required for OLED manufacturing are still held by Japan (exposure equipment, deposition equipment, ion implantation equipment) and the U.S. (thin-film encapsulation). Kim Sung-jin, full-time vice chairman of the Display Industry Association, stressed, "To achieve technological independence in SoBuJang sectors with high overseas dependence, government support such as R&D for fundamental technology development, reliability evaluation, and professional workforce training is crucial."

There is also a widespread view that in the era of the 4th Industrial Revolution and non-face-to-face (untact) culture due to COVID-19, the key to maintaining a super-gap in semiconductors lies in the closely related display industry. Displays serve as devices that convey information visually and act as the "eyes of industry" by integrating with other sectors such as touch sensors, automobiles, the Internet of Things (IoT), and artificial intelligence (AI). Starting from cathode-ray tubes in the 1960s, through flat panel displays like LCDs in the 1990s, the industry has been increasing its value with next-generation displays such as flexible, rollable, and stretchable types.

Vice Chairman Kim said, "Displays, which visualize information, are core devices connecting machines and humans and are high value-added industries leading the 4th Industrial Revolution," adding, "New products applying South Korea's unique technologies should act as new demand drivers, not only in existing markets like mobile and TV but also in new markets such as augmented reality (AR) and virtual reality (VR) displays responding to the spread of untact culture, automobiles, architecture, and smart homes, where demand should be created and secured first." A challenge to overcome is that the display industry ecosystem is centered around 'panels.' While South Korea has held the number one global market share in display panels since 2004, the downstream industries such as equipment and materials and parts remain in the fourth tier.

This content was produced with the assistance of AI translation services.