Samil PwC: "Fabless, the Driving Force for New Technologies, Needs Investment Boost"

Report on the Current Status of Korea's Fabless Sector and Strategies for Strengthening the Ecosystem
Measures for Investment Attraction, Foundry Collaboration, and Demand Creation Proposed... "Support Needed for M&A"

As semiconductor exports reached an all-time high, the gap in export ratios between memory and non-memory semiconductors is also widening. In particular, the fabless sector, which focuses on semiconductor design, holds only about a 1% share of the global market, highlighting the urgent need for increased investment and support.

On November 5, Samil PricewaterhouseCoopers Management Research Institute announced the publication of the report "Saving Private K-Fabless," which outlines the current state and development strategies for Korea's fabless semiconductor industry.

According to the report, as of September, memory products accounted for 66% of Korea's semiconductor exports. This represents an increase from the five-year average of 60%, indicating a deepening reliance on memory semiconductors. In contrast, Korea continues to lag behind advanced global competitors in the non-memory sector, which makes up 76% of the global semiconductor market. While the foundry segment, led by Samsung Electronics-the world's second-largest foundry company-has a significant presence, Korea's fabless sector holds only about a 1% share of the global market.

The report predicts that, just as generative artificial intelligence (AI) has driven a boom in graphics processing units (GPUs), the emergence of new technologies such as autonomous vehicles, humanoid robots, and quantum computers will generate demand for new system semiconductor designs optimized for these fields. It warns that the sluggish growth of the fabless ecosystem could not only hinder the semiconductor market but also undermine the growth engines of advanced industries that rely on it.

The report identifies several key challenges facing Korean fabless startups: low levels of investment, high barriers to entry in the manufacturing process, and a shortage of customers. Korea's overall research and development (R&D) scale remains significantly lower than that of technology leaders such as the United States and China, and most startups are stuck in the early stages of fundraising. In addition, even after completing product designs, startups struggle to secure foundry partners for actual production, and the lack of early customers makes it difficult to build references needed for overseas market entry.

Samil PricewaterhouseCoopers Management Research Institute

The report proposes the following measures to revitalize Korea's fabless ecosystem. First is the activation of both public and private investment. Given the heavy reliance on public funds such as the Korea Fund of Funds in the domestic venture investment sector, it is essential to expand policy-based financing and create an environment that attracts private investment.

Second, the report suggests introducing a public foundry or launching joint development projects to strengthen links with domestic foundries. The report notes, "When Taiwan's TSMC, the world's leading foundry, was a startup, it played the role of a public foundry and contributed to the development of Taiwan's semiconductor ecosystem."

Third is supporting the acquisition of initial demand. To this end, the report recommends pilot adoption of products developed by domestic fabless companies in government-planned projects or providing incentives to private sector customers.

Finally, the report emphasizes the importance of strategic mergers and acquisitions (M&A). It states, "By acquiring domestic and international companies with superior technologies, it is possible to both strengthen internal capabilities and expand the business footprint."

Jung Jaeguk, Partner and Technology, Media, and Telecommunications (TMT) Industry Leader at Samil PricewaterhouseCoopers Management Research Institute, said, "Major global semiconductor companies are actively engaging in alliances and mergers to secure core technologies and gain rapid market advantage. In Korea, regulatory relaxation in the transaction process, as well as appropriate policy financing and tax support, are needed to facilitate smooth fabless M&A."

Detailed information on the report can be found on the Samil PricewaterhouseCoopers Management Research Institute website.

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