The Lost Dream of Semiconductors... China Deprived of Investment Opportunities [New Economic Security Landscape]

④China Investment Losing Appeal Amid Repeated City Lockdowns and Prolonged US-China Hegemony War

Empty Shanghai Downtown Highway Due to COVID-19 Lockdown
[Image Source=Yonhap News]

[Asia Economy Reporters Sunmi Park, Hyunjin Jung]"About 40% of semiconductor companies are considering relocating their manufacturing facilities from China to South Korea, Japan, Taiwan, and Southeast Asia." (May 2022, Tianfeng International Securities Semiconductor Report)

With the launch of the U.S.-led Indo-Pacific Economic Framework (IPEF), semiconductor alliances among participating countries including South Korea, the U.S., and Japan have been established, shrinking China's position, which had aspired to semiconductor dominance. China's efforts to attract foreign semiconductor companies while proclaiming self-sufficiency goals are losing appeal due to city lockdowns under the 'Zero COVID' policy and the prolonged U.S.-China hegemonic conflict.

According to the semiconductor industry on the 31st, major semiconductor companies including South Korea's Samsung and SK Hynix have halted large-scale investments in China. Jiangsu Province, known as a semiconductor hub in China, is planning an online event next month to attract foreign semiconductor companies, but it is reported to be struggling to attract companies due to the launch of IPEF led by the U.S. with participation from South Korea and Japan.

Targeting the huge semiconductor demand market in China, Samsung Electronics and SK Hynix, which made early investments and established production bases, have not considered significant additional investments in China since 2019. Samsung's two memory NAND production plants operating in Xi'an, China, were started in 2012 and 2018, with no large-scale expansion plans since then. SK Hynix also operates the C2 and C2F plants producing DRAM in Wuxi, Jiangsu Province, but after completing the C2F plant in June 2019, no further expansion plans have been made.

Samsung Electronics and SK Hynix are no longer increasing their dependence on China, where they once actively invested to meet rising semiconductor demand, instead turning their attention to expanding domestic investments and investments in other overseas regions such as the U.S. Global semiconductor companies are also turning away one after another, unable to overcome the U.S. opposition erected in front of China.

Intel, a representative U.S. semiconductor company, announced in November last year that it would increase production of silicon wafers, a semiconductor raw material, by investing in its Chengdu plant in China, but later withdrew the plan. At the time, Intel emphasized the necessity of investment to secure Chinese customers to compete with Taiwan's TSMC and Samsung Electronics, but the Biden administration pressured the company citing national security concerns, causing the plan to collapse. Dutch semiconductor equipment maker ASML has not received export permits from its government for China since June 2019 due to U.S. requests.

In addition to the prolonged U.S.-China hegemonic conflict, forced lockdowns in Chinese cities due to COVID-19 are also a burden on the semiconductor industry. According to the Korea International Trade Association, about 700 semiconductor companies are located in Shanghai alone, where lockdowns intensified from April, accounting for 25% of all semiconductor companies in China. The association analyzed in a report, "With Shanghai city locked down for nearly two months, the direct loss is estimated at about 2.2 trillion KRW per day, and major industries such as automobiles, semiconductors, pharmaceuticals, and aviation are showing signs of prolonged damage."

Meanwhile, semiconductor emerging countries, recognizing that global semiconductor investment expansion in China is no longer as before, are actively seeking to attract these companies by promising subsidies for semiconductor manufacturing facilities. A representative example is India, a rival of China. Early last month, Intel CEO Pat Gelsinger met with Indian Prime Minister Narendra Modi, the U.S. Semiconductor Industry Association (SIA) delegation visited India, and TSMC and GlobalFoundries are reportedly discussing local factory establishment with the government.

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