Decline of South Korea's Semiconductor Status in China... Direct Hit from U.S. Regulations on China

China Semiconductor Import Market Share in 2021 Compared to 2018
Taiwan Up 4.4%p Vs South Korea Down 5.5%p

[Asia Economy Reporter Park Sun-mi] Since the United States imposed semiconductor supply restrictions on China, the status of K-semiconductors in China, the world's largest semiconductor market, has significantly weakened.

On the 25th, the Federation of Korean Industries (FKI) analyzed changes in the market share of semiconductor imports from major countries (regions) including Taiwan, South Korea, ASEAN6 (Vietnam, Singapore, Thailand, Philippines, Malaysia, Indonesia), Japan, and the United States in China after the U.S. semiconductor supply restrictions on China began in 2019. Compared to 2018, Taiwan's share increased by 4.4 percentage points and Japan's share by 1.8 percentage points, while South Korea's share decreased by 5.5 percentage points in 2021.

China's semiconductor imports in 2021 increased by 37.2% compared to 2018, the year before the U.S. restrictions began. Imports of semiconductors from Taiwan and Japan increased by 57.4% and 34.8%, respectively. This is analyzed as a result of increased imports of Taiwanese semiconductor chips due to the U.S. sanctions blocking both Chinese domestic companies and foreign-invested companies in China from purchasing U.S. semiconductors.

In contrast, China's imports of Korean semiconductors increased by only 6.5%, due to the impact of Huawei's suspension of Korean memory purchases following U.S. regulations and the decline in memory semiconductor prices, resulting in a 13.7% decrease in China's imports of Korean memory semiconductors in 2021 compared to 2018.

China's semiconductor imports in 2021 amounted to $468.6 billion, approximately 1.8 times the $255 billion in crude oil imports. In 2020, China's share of global semiconductor demand, based on the location of production countries, reached 60%, highlighting the importance of semiconductors in the Chinese economy. China's semiconductor industry last year (based on semiconductor integrated circuits) continued quantitative growth with sales increasing by 61.0% and production volume by 94.0% compared to 2018.

The U.S. semiconductor industry expects that, through strong support from the Chinese central government, the gap with global major companies in advanced node foundry production, equipment, and materials sectors?where the gap is currently large?will narrow over the next decade. In fact, China's top foundry company SMIC announced a new investment of $5 billion (approximately 6.16 trillion KRW) in February this year to expand semiconductor production capacity, and the second-largest company, Hua Hong Semiconductor, is raising about 15 billion yuan (approximately 2.9 trillion KRW) through a secondary listing on the Shanghai Stock Exchange to secure investment funds.

Kim Bong-man, head of the International Headquarters at FKI, advised, “As major countries such as the U.S., China, Europe, and Japan are mobilizing national capabilities to build autonomous semiconductor ecosystems and accelerate supply chain restructuring, the newly inaugurated government in May should strengthen policy support such as R&D investment and tax benefits for semiconductor companies to secure a global super-gap for K-semiconductors.”

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