Even 'Fabless' Threatened... US Association: "China to Surpass Korea as World's No. 2 by 2030"

US Global Market Share 36%
China's Advanced Technology Rapidly Closing Gap... 23% by 2030
Korea 19%, World No. 2 at Risk

Photo by AP Yonhap News

[Asia Economy Reporter Han Yeju] As fabless (semiconductor design), dominated by the United States, emerges as the core of the system semiconductor market, China is rapidly catching up and asserting its presence. While Korean semiconductors have focused solely on defending their memory sector, China is pursuing a ‘semiconductor rise’ through technological advancement, raising concerns that Korea may lose its foothold in the fabless sector.

According to the Semiconductor Industry Association (SIA) on the 21st, China’s global market share in semiconductor design is expected to grow to 23% by 2030, following the United States, which holds the top spot at 36%. Considering that China’s market share was only 5% in 2015, this represents a remarkable growth rate. In contrast, Korea, which held a 19% share in 2020, is projected to remain at 19% in 2030, failing to break the 20% barrier. This means that China could surpass Korea to become the world’s second-largest player in the fabless sector by 2030.

China’s semiconductor design has also shown notable achievements in research recently. At this year’s International Solid-State Circuits Conference (ISSCC), known as the ‘Semiconductor Design Olympics,’ the number of Chinese papers accepted surpassed Korea’s for the first time. Korea had 32 papers accepted at this conference, ranking third after China with 59 and the United States with 42. This is the first time since the ISSCC began that China has outpaced Korea in paper acceptances.

The number of system semiconductor design patent registrations by Chinese companies domestically also surged more than sixfold from 2,154 in 2016 to 13,087 last year. The number of Chinese fabless companies reached 2,810, more than doubling from 1,362 in 2016 over five years. Currently, there are only about 120 fabless companies in Korea. Since most of these are small and medium-sized enterprises, the domestic fabless industry is growing very slowly. An analysis of the operating profits of 17 major listed fabless companies in Korea for the first three quarters of this year found that five companies are operating at a loss. This means about one in three companies is in the red. Only five companies?LX Semicon, Jeju Semiconductor, Telechips, Above Semiconductor, and AD Technology?exceeded 100 billion KRW in cumulative sales for the first three quarters. LX Semicon is the only company with sales exceeding 1 trillion KRW. Among the world’s top 50 fabless companies, LX Semicon is the sole Korean firm.

Expectations are growing that investment in semiconductor design will play a pivotal role in industrial innovation. The SIA stated, “Design is a critical part of the semiconductor value chain,” adding that “significant research and development (R&D) investment is required for cutting-edge chip design.”

Experts say the absolute shortage of design specialists is the biggest weakness of Korean fabless companies. The number of graduates in relevant majors is insufficient, and since graduates prefer large corporations, the inflow of talented personnel into fabless companies, mostly small and medium-sized enterprises, has been cut off. Small fabless companies also face structural challenges, relying on overseas firms for design intellectual property (IP) and design tools necessary for semiconductor design. This indicates a lack of a foundation to independently develop next-generation semiconductors.

Professor Lee Hyukjae of the Department of Electrical and Computer Engineering at Seoul National University said, “The biggest problem in the domestic fabless industry is the shortage of manpower, and it is also necessary to expand the scale of the fabless industry itself,” advising, “Since fabless companies are mostly small and medium-sized enterprises, government support to activate mergers and acquisitions (M&A) would be beneficial.”

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