No Contender in Korean Foundry Besides Samsung... Market Share Decline Amid Vice Chairman Lee Jae-yong's Absence (Comprehensive)

TrendForce Forecasts South Korea Foundry Market Share to Drop from 18% to 17%
Taiwan and China Rise While South Korea Declines Alone

[Asia Economy Reporter Park Sun-mi] In the foundry (semiconductor contract manufacturing) sector, which the global semiconductor industry regards as a future growth business, it is forecasted that South Korea's market share this year will remain at 17%, down from last year. Concerns are growing that without the management participation of Samsung Electronics Vice Chairman Lee Jae-yong, bold investments necessary to achieve the 'System Semiconductor Vision 2030' goal will be difficult, causing South Korea's semiconductor industry to fall behind competing countries like Taiwan and China, which are pouring in investments.

On the 26th, global market research firm TrendForce estimated that global foundry sales will reach $128.784 billion this year, about a 20% increase from last year's $107.542 billion.

Based on sales, the foundry market share by country is expected to decline solely for South Korea. It is projected to drop from 18% last year to 17% this year. During the same period, Taiwan, a competitor, is expected to rise from 64% to 66%, and China from 7% to 8%.

The reason for the weakening of South Korea's foundry competitiveness is that Samsung Electronics is the only player capable of playing a role. In fact, South Korea's foundry industry is dominated by Samsung Electronics, but since Vice Chairman Lee Jae-yong, who proposed the 'System Semiconductor Vision 2030' in 2019, has faced restrictions on his management participation, progress has stalled. TrendForce predicted that due to difficulties in making timely bold investments, Samsung's foundry market share will fall from 18% last year to 16% this year.

Samsung's Decision Needed to Raise South Korea's Foundry Market Share

Taiwan's world No.1 foundry company TSMC is expected to increase its market share from 53% last year to 56% this year, a 3 percentage point rise. This is due to aggressive investments backed by government policy support. This month, TSMC announced it will invest 1 trillion yen (about 9.6 trillion won) to build a semiconductor factory in Kumamoto Prefecture, Japan. Since last year, it has been constructing six new factories. Additional investment plans are also being announced continuously. Other Taiwanese foundry companies such as UMC (7%), VIS (2%), and PSMC (1%) are also expanding their global market shares, actively fostering the foundry industry at the national level.

On the other hand, Samsung Electronics has not presented any significant semiconductor investment plans since deciding on about a 20 trillion won investment for its semiconductor factory in Taylor City, USA, at the end of last year. Especially in the rapidly changing semiconductor industry, if the owner does not make final decisions directly, it is difficult to make quick decisions. In other words, to increase dominance in the foundry market, there is no alternative but Samsung Electronics, the 'sole player,' to make swift decisions and bold investments.

Samsung Electronics' large-scale investment and mergers & acquisitions (M&A) have also stalled due to Vice Chairman Lee's long absence caused by judicial risks. In fact, Samsung Electronics has not conducted any large-scale M&A exceeding 1 trillion won since 2017.

Vice Chairman Lee's prison term for the state affairs manipulation case expires in July. If he is released at the end of his term, he will face a five-year employment restriction, making normal management activities impossible. This is why the business community is petitioning the current government for a special pardon and reinstatement that would allow Vice Chairman Lee to resume management activities immediately.

Previously, on the day before, five economic organizations?the Korea Chamber of Commerce and Industry, Korea International Trade Association, Korea Federation of SMEs, Korea Employers Federation, and Korea Federation of Medium-sized Enterprises?submitted a 'Special Pardon Petition for Economic Development and National Unity' to the Blue House and Ministry of Justice ahead of Buddha's Birthday on the 8th of next month.

Amid discussions of the Moon Jae-in administration's last special pardon, economic organizations petitioned for pardons and reinstatements for business leaders including Vice Chairman Lee and Lotte Group Chairman Shin Dong-bin. These organizations emphasized, "The national economy is in an unpredictable crisis situation," and "To overcome the crisis and secure future competitiveness, the dedication of capable business leaders is necessary."

Latecomer China Also Launches Full-scale Semiconductor Offensive

China is sweeping up global semiconductor production equipment to raise its semiconductor self-sufficiency rate.

According to the Semiconductor Equipment and Materials International (SEMI), global semiconductor production equipment sales surged 44% last year to $102.6 billion. This is the result of semiconductor companies worldwide aggressively investing to increase production. Notably, China, which spent $13.11 billion on semiconductor equipment purchases in 2018, spent more than double last year at $29.6 billion, ranking first in the world for equipment purchases for two consecutive years.

China's semiconductor self-sufficiency rate was only 15.8% in 2020, but it is pushing forward its semiconductor rise policy with the goal of raising it to 70% by 2025. In fact, China's semiconductor imports in the first quarter of this year decreased by 9.6% year-on-year due to increased domestic semiconductor production driven by the semiconductor rise policy.

Although China is a latecomer ranked sixth globally in semiconductor sales last year (sales of $34 billion, 6.1% share), it is rapidly growing thanks to the government's unprecedented policy and capital support. China's top foundry company SMIC announced a new investment of $5 billion (about 6.16 trillion won) in February to expand semiconductor production capacity, and the second-ranked company Hua Hong Semiconductor is raising about 15 billion yuan (about 2.9 trillion won) through a second listing on the Shanghai Stock Exchange to secure investment funds.

Kim Bong-man, head of the Federation of Korean Industries' International Headquarters, 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 new government launching in May should strengthen policy support such as R&D investment and tax benefits for semiconductor companies to secure K-semiconductor's global super-gap."

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