South Korea's Semiconductor Weakness in 'Design'... While Top 10 Revenues Grew 50%, Korea Was Absent

The Importance of Semiconductor Design Grows...
South Korea Perceived as 'Weak' in Design

[Asia Economy Reporter Park Sun-mi] While the global top 10 semiconductor design (fabless) companies saw their sales grow by nearly 50% last year, Korean companies that failed to enter the rankings did not fully benefit from the boom. This is seen as a clear reflection of the weakness of the Korean semiconductor industry, which is strong only in memory production.

According to TrendForce, a semiconductor market research firm, the total sales of the global top 10 chip design companies reached $127.4 billion last year. Sales grew by 48% compared to 2020. Amid a widespread semiconductor shortage and soaring chip prices, companies specializing only in design without owning manufacturing plants also saw their sales rise accordingly.

The benefits were monopolized by the U.S. and Taiwan, which are strong in semiconductor design. Among the top five companies, four are American. Qualcomm, ranked first, recorded chip design sales of $29.333 billion last year, a 51% increase from the previous year. Sales of mobile phone system-on-chip (SoC) and Internet of Things (IoT) chips grew by 51% and 63%, respectively, driving this growth. Nvidia, ranked second, also grew 61% to $24.885 billion, while Broadcom ($21.026 billion, 18%) and AMD ($16.434 billion, 68%), ranked third and fifth respectively, also saw rapid growth.

Taiwanese companies also showed remarkable progress. MediaTek, ranked fourth, earned $17.619 billion with a growth rate of 61%, and companies within the top 10 such as Novatek (79%), Realtek (43%), and Himax (74%) also performed impressively.

TrendForce analyzed that this year, the demand for high-spec products such as high-performance computing, ultra-high-speed transmission, servers, automotive, and industrial applications is increasing worldwide, leading to revenue growth and business opportunities for chip design companies. The importance of semiconductor design is growing with the expansion of artificial intelligence (AI) and 5G technologies.

However, most Korean fabless companies are small and medium-sized enterprises currently experiencing stagnant growth. Collaboration with foundry companies, which manufacture products according to orders, is essential for design companies. Amid the global semiconductor boom, orders from the top 10 fabless companies are concentrated on foundry companies, leaving smaller Korean fabless companies with fewer opportunities.

This structure is pointed out as a long-term obstacle to the development of the Korean semiconductor industry. Typically, fabless companies design semiconductors and entrust production to foundry companies, then deliver to customers such as IT and automobile manufacturers. However, as countries worldwide are building semiconductor ecosystems connecting design, materials, equipment, and production, Korea, which focuses mainly on production, has become relatively less competitive.

While the Taiwanese semiconductor industry strengthens internal connections from design to foundry and back-end processes, the U.S. is also expected to see synergy with American companies strong in semiconductor design as Intel re-enters the foundry market. The market fears that if American companies dominating the global fabless market reduce their reliance on Taiwan's TSMC and Korea's Samsung Electronics and shift orders to Intel, the Korean foundry market could face a crisis.

Concerns are rising that the Korean semiconductor industry may face repercussions from failing to build an ecosystem connecting design, materials, equipment, and production. Choi Do-yeon, a researcher at Shinhan Financial Investment, said, "Korea is the world's strongest semiconductor country in memory, but is relatively inferior to Taiwan and the U.S. in the non-memory sector," adding, "Non-memory requires securing design capabilities, but there is a lack of active incentives to attract talent."

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