"No Player but Samsung"... Korea's Foundry Market Share Declines This Year Amid JY Absence

Graph: TrendForce

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[Asia Economy Reporter Park Sun-mi] The global semiconductor industry, which regards the foundry (semiconductor contract manufacturing) sector as a future growth business, forecasts 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 this year will reach $128.784 billion, about 20% higher than last year's $107.542 billion.

Based on sales, TrendForce predicted a decline in South Korea's foundry market share alone. It was lowered from 18% last year to 17% this year. During the same period, competing countries saw Taiwan rise from 64% to 66%, a 2 percentage point increase, and China was forecasted to increase 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 solely by Samsung Electronics, but progress has stalled as Vice Chairman Lee Jae-yong, who proposed the 'System Semiconductor Vision 2030' goal in 2019, has faced restrictions on his management participation. TrendForce predicted that Samsung's foundry market share will also fall from 18% last year to 16% this year due to difficulties in making timely bold investments.

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Taiwan's world No.1 foundry company TSMC is expected to increase its 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 one after another. 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.

The halt in Samsung Electronics' large-scale investments and mergers and acquisitions (M&A) is also due to the long absence caused by Vice Chairman Lee's 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 also 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.

Earlier, on the previous day, 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 'Petition for Special Pardon and Reinstatement 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 talks 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."

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