Thanks for the memory, South Korea tells nation's chip makers – now build processors

President warns of 'all-out national warfare' around silicon as he announces $19B development package

South Korea's president has described the global semiconductor industry as "a field where all-out national warfare is underway" as he announced a $19 billion to diversify the nation's silicon sector.

In remarks presented on Thursday at a government economic review meeting, President Yoon Suk Yeol called for South Korea to "open a new future for the semiconductor industry."

"Our semiconductors have dominated the world in the memory field over the past 30 years," he declared, before lamenting that "our fabless market share still remains in the one percent range, and foundries that manufacture system semiconductors are unable to narrow the gap with leading companies such as TSMC."

Change is therefore needed.

"In the future, the success or failure of the semiconductor industry will be determined by system semiconductors, which account for two thirds of the entire market," he predicted, calling for his nation "to bet on system semiconductors, which are constantly expanding beyond CPUs and GPUs to AI semiconductors."

To make that happen, South Korea has created a $19 billion program to fund construction of chipmaking mega-clusters – especially the electrical and transport infrastructure they need. Provision of water resources for chipmaking has also been fast-tracked.

The plan will also see a "mini-fab" created, so that small and medium-sized fabless chip firms have a resource they can use to get their products off the drawing board. They will also be helped by a fund that President Yoon said will help to turn them into global enterprises.

The president noted that government funds flowing to chipmakers could be perceived as "a tax cut for large corporations or a tax cut for the rich." He rebutted that notion by arguing "the semiconductor industry is the most important and sure foundation for making our people's lives richer and making our economy take off."

"Semiconductors are the livelihood of the people, and all support for the semiconductor industry is for the benefit of the people," he argued, adding that government investment will pay for itself handsomely over time.

Government ministers were the main audience for the presidential speech, and were told to go back to their offices and make His Excellency's vision a reality.

"Nowadays, countries around the world are putting their national fates on semiconductors," observed President Yoon. "This is literally waging an industrial war. I will jump in and resolve issues that need to be resolved diplomatically. You, including the ministers of each ministry, must be strong supporters of our companies. I also hope that we will be ready to provide all-out support by breaking down the walls between ministries and departments within each ministry."

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President Yoon raised many solid points. The United States and European Union have thrown tens of billions of dollars and euros respectively at IC manufacturers, while South Korea's chip champs – Samsung Electronics and SK hynix – are indeed monsters of memory as they collectively hold over 70 percent of the market for DRAM and NAND flash. But beyond Samsung's modest Exynos SoC operation (which can't even satisfy demand for its own Galaxy smartphones), South Korea is not home to a notable manufacturer of high-value processors.

Samsung and SK hynix have also made enormous bets on factories to produce more memory – some on the peninsula and others stateside (where they could attract funds from Uncle Sam).

South Korea's new funding package is tiny compared to the sums its chip champions are spending, so it's unlikely it will divert their efforts notably. Nor will it deter them continuing to target the so-hot-right-now memory market, in which demand for DDR5 and related variants – plus high bandwidth memory (HBM) – is currently rampant. Indeed, SK hynix has already found buyers for all the HBM it can make in 2024 and most of the chips it will produce in 2025.

Memory-centric analyst firm TrendForce recently worried out loud about AI-fuelled demand for HBM skewing manufacturing investments away from DRAM, and maybe causing a shortage of the latter in years to come.

But at least South Korea's new incentive package seems unlikely to add to existing supply chain pressures. ®

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