US Pressure Followed by EU Love Call... Is It an Opportunity or a Crisis Amid Korea's Semiconductor Hegemony Battle?

Thierry Breton, European Union (EU) Commissioner for Internal Market
[Photo by AP News]

[Asia Economy Reporters Hyunjin Jeong and Suhwan Kim] Amid the intense global semiconductor hegemony battle, the Korean semiconductor industry is simultaneously receiving both love calls and pressure from major countries such as the United States and Europe. This is because domestic semiconductor companies like Samsung Electronics and SK Hynix play a crucial role in the market. Attention is focused on whether this situation will become an opportunity to secure incentives or a crisis due to unwanted information disclosure and investment pressure.

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Will Incentives Be Offered to Samsung and SK Hynix?

Thierry Breton, European Union (EU) Commissioner for Internal Market, is highly likely to present incentives for European investment during his meetings with Samsung Electronics and SK Hynix in Korea on the 30th and the 1st of next month. Globally, the only foundry companies capable of advanced processes are Taiwan's TSMC and Samsung Electronics, and in the memory semiconductor market, domestic companies such as Samsung Electronics and SK Hynix hold an overwhelming market share. From the EU's perspective, which is seeking to expand semiconductor production facilities, attracting investments from domestic companies leading major markets is advantageous.

Since the end of last year, the EU has recognized the importance of strengthening the semiconductor industry and has been rapidly implementing strategies. The EU has set a goal to increase its global semiconductor production share from the current 10% to 20% by 2030 and plans to invest 145 billion euros over the next 2-3 years to enhance the competitiveness of its semiconductor industry. Additionally, the EU has included semiconductors among six strategic industries in its new industrial policy, formed a semiconductor alliance among companies within the EU, and decided to strengthen international cooperation. Recently, Ursula von der Leyen, President of the EU Commission, announced plans to enact a Semiconductor Support Act.

[Image source=Reuters Yonhap News]

The EU's provision of incentives to the semiconductor industry is likely not the first for domestic companies. Earlier this month, Intel announced plans to invest up to 80 billion euros in Europe to build two semiconductor factories. Although the EU has not officially confirmed subsidy support, it is analyzed that Intel likely secured such promises. Before the investment announcement, Intel CEO Pat Gelsinger stated that "80 billion euros in subsidies are needed to attract Intel factories to Europe," and after active discussions with EU governments, the investment decision was made.

However, it remains uncertain whether domestic companies will actually build factories in Europe. Samsung Electronics and SK Hynix have already announced large-scale investment plans in Korea and the United States, and there is an opinion that making massive investments in Europe is difficult because the consumption of semiconductors mainly produced by domestic companies in Europe is relatively smaller compared to other regions.

Global Semiconductor Hegemony: Cooperation and Competition Coexist

The EU's efforts come amid a difficult situation for domestic companies, as the U.S. government demands sensitive information from related companies citing semiconductor supply shortages. The U.S. government has requested submission of information by November 8, including monthly sales volume of products with high sales and order volumes over the past three years, the top three customers per product, and the expected sales proportion per customer. Although the U.S. emphasizes that this is a voluntary investigation, it continues pressure by leaving open the possibility of forcibly collecting internal information using the Defense Production Act (DPA). Domestic semiconductor companies are currently reviewing this internally.

[Image source=AP Yonhap News]

At the same time as this pressure, the U.S. is also seeking cooperation. While Commissioner Breton was visiting Asia, the U.S. and EU held the first meeting of the U.S.-EU Trade and Technology Council (TTC) on the 29th (local time) in Pittsburgh, U.S., agreeing to strengthen cooperation in semiconductor supply chains and to secure leadership in the new era of technological competition. They stated, "We will enhance mutual communication to identify common vulnerabilities related to semiconductor supply chains and develop regional technology R&D and manufacturing ecosystems," and agreed that governments will actively support strengthening domestic semiconductor production capabilities.

According to the Semiconductor Industry Association (SIA) in the U.S., the overall semiconductor market share as of last year is 47% for the U.S., 10% for Europe, compared to 20% for Korea, 10% for Japan, 7% for Taiwan, and 5% for China. However, considering only production capacity excluding fabless companies, the shares of the U.S. and Europe drop to 21%, significantly lower than Asia's 75%. A domestic semiconductor industry official said, "As the U.S., China, and Europe compete fiercely to dominate the global semiconductor hegemony, Korea stands between opportunity and crisis," adding, "The related industry must respond together with the government, cooperating where possible and strengthening competitiveness where necessary."

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