Korea and Taiwan Become 'Semiconductor OPEC'... "Global Economy Impacted by Production Volume"

TS Lombard Economist Diagnosis... "Move the Spotlight"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] "Semiconductors have become the new oil. Just as the Organization of the Petroleum Exporting Countries (OPEC) controls oil, Taiwan and Korea have come to hold an almost monopolistic position in semiconductor production."

Lori Green, an economist at the UK research firm TS Lombard, recently made this assessment in light of the semiconductor shortage crisis. She suggested that just as international oil prices, a key element of the global economy, have been shaken by geopolitical factors in the Middle East, the global economy will now be influenced by supply and demand adjustments primarily controlled by Taiwan and Korea, the main producers of semiconductors. She referred to Taiwan and Korea as the "new OPEC."

According to Green's article titled "Geopolitical Spotlight Shifts to Semiconductors," posted on the TS Lombard blog on the 13th (local time), Taiwan and Korea account for 83% of the world's processor chip production and 70% of memory chip production. Examining export trends over the past five years, semiconductors have accounted for an average of 64% of Taiwan's export growth and 41% of Korea's export growth, indicating a significant share.

Green stated, "The enormous demand for semiconductors will create new geopolitical weight," adding, "Taiwan and Korea will find themselves at the forefront of US-China conflicts, economically dependent on China for growth while aligning with the US on national security." The two countries that consume the most semiconductors globally rely heavily on Taiwan and Korea for different reasons, which could entangle Taiwan and Korea in US-China tensions.

However, Green emphasized, "Nonetheless, holding a manufacturing advantage in semiconductors means they can leverage strategic importance for economic and political benefits," and added, "Taiwan and Korea will do everything to maintain the status quo and plan to keep advanced manufacturing equipment in Asia." He noted, "Semiconductors are embedded directly in all products beyond home appliances or indirectly included in the machines or processes that make products," and added, "Capital expenditure (Capex) is now semiconductor-intensive."

Green believes that Taiwan and Korea's semiconductor production affects the global economy and that semiconductor prices can influence inflation. He mentioned that Taiwan's TSMC raised semiconductor prices by up to 15%, with other companies following suit, stating, "The shortage caused by increased semiconductor demand could trigger inflation." He continued, "Price increases will spur competition, but entry barriers remain high. If price increases are managed, their hegemony over semiconductor production could be sustained for a longer period."

Furthermore, Green said, "As the need for technological capability and capital concentration in semiconductor production grows, Taiwan and Korea's leadership will continue to expand," adding, "Supply, demand, and bottlenecks in global growth will center around Taiwan and Korea's semiconductor production. While they will not hold a monopolistic position forever, considering their technology, research and development (R&D) investments, and capital expenditure plans over the next five years, it will be difficult for their monopolistic status to change."

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