[Teheran-ro] The Dark Side of the Semiconductor Supercycle

"We can clearly feel the semiconductor supercycle, this unprecedented boom, on the ground."
An executive at a semiconductor equipment company stated, "Our plant is currently running at full capacity, and all employees are working overtime and on weekends."
The semiconductor market has entered a supercycle. As the era of artificial intelligence (AI) unfolds, demand for High Bandwidth Memory (HBM) and other chips is surging. In fact, the World Semiconductor Trade Statistics (WSTS) forecasts that the global semiconductor market will grow more than 25% this year from last year and, for the first time ever, surpass 1 trillion dollars (about 1,439 trillion won). If this happens, Korea, which leads the global semiconductor market, will be among the biggest beneficiaries. Reflecting this, Samsung Electronics and SK hynix are accelerating capacity expansion investments to respond to the supercycle. SK hynix has decided to invest 19 trillion won to build a back-end process plant in Cheongju, North Chungcheong Province.
When large corporations in downstream industries ramp up investment like this, semiconductor equipment makers in upstream industries benefit from the trickle-down effect. As a result, these equipment companies are also increasing production or investing to strengthen Research and Development (R&D).
Jusung Engineering, for example, is investing 100 billion won to build a second research center with a total floor area of 20,495 square meters in Yongin, Gyeonggi Province. HANMI Semiconductor is also constructing a 14,570-square-meter Hybrid Bonder Factory in the Juan National Industrial Complex in Seo District, Incheon.
There is, however, a disappointing side. When Samsung Electronics and SK hynix invest, most of the benefits flow to foreign equipment makers such as Applied Materials in the United States and Tokyo Electron in Japan. According to the Korea Semiconductor Industry Association, the localization rate of semiconductor equipment in Korea is only about 20%. In other words, roughly 80% of domestic semiconductor investment effectively goes overseas.
The problem looks even more serious when compared with China. According to Longzhong Consulting, the localization rate of semiconductor equipment in China reached 45% last year. That is a 10-percentage-point increase from 35% the previous year. Compared with 16% in 2022, it has nearly tripled.
In this context, the government’s recent decision to provide a total of 121.1 billion won to companies such as Jusung Engineering, Soulbrain, and Dongwha Electrolyte to foster advanced industries is a welcome move. Under this program, each company can receive up to 20 billion won in support.
For Korea to fully benefit from the semiconductor supercycle, it is time to support not only downstream industries but also upstream sectors more boldly. As a country that leads the global semiconductor market, one can only hope that Korea’s equipment makers will achieve a high localization rate and go on to dominate the global market as well.
butter@fnnews.com Reporter