"Will Korea's 4,700 Trillion Won Bet Pay Off? It Could Fail to Surpass TSMC and Fall Into a 'Trap'" ... Taiwan's Warning

[Financial News] As the Korean government, Samsung Electronics, SK hynix and others unveiled semiconductor and artificial intelligence (AI) investment plans worth a combined 4,700 trillion won, analysts in Taiwan, home to the world's largest foundry company TSMC, said competition will intensify but Taiwan's edge is unlikely to be shaken.
According to Taiwanese media outlets including United Daily News and China Times on the 30th, Liu Pei-chen, a researcher at the Taiwan Institute of Economic Research (TIER), said Korea's announcement of the Three Mega Projects would make semiconductor competition between Korea and Taiwan even fiercer.
He said Korea's massive investment would push Taiwan to accelerate research and development in advanced processes. Still, he argued that Taiwan would retain its irreplaceable status as a global semiconductor hub.
Lin Weizhi, executive vice president of the Zhu Fu Industry Trend Research Institute and a former vice president in charge of strategy at Foxconn, also said, "Korea's plan is a strategy to absorb overseas demand for the AI industry," adding that it was "modeled after Taiwan's science park system."
He added, however, that Korea could face greater long-term risks than Taiwan. If AI demand slows around 2032, Korea's large-scale semiconductor projects may see demand weaken before depreciation from factory construction and equipment investment has run its course.
He warned, "Korea has a small domestic market, so it will be difficult to absorb a drop in demand on its own. There is a risk that the heavy fixed-cost burden will hurt corporate earnings and trap companies in a 'Capex Trap.'"
He also stressed that a semiconductor cluster cannot be built overnight, noting that China has continued large-scale investment for more than 10 years but still has not surpassed Taiwan's competitiveness.
Taiwanese experts said semiconductors are an industry that requires enormous capital, and that Korea's move to expand production bases in the Honam Region is also aimed at easing the burden of land, water and power costs in the capital area.
They also expressed concern that such mega-scale investments come with astronomical depreciation costs, which could sharply weaken profitability if global semiconductor demand slows or factory utilization rates fall.
In particular, they argued that Korea's economy is centered on a small number of large conglomerates such as Samsung Electronics and SK hynix, so any demand shock could spread more widely across the national economy than in Taiwan.
Earlier, the Korean government, Samsung Electronics and SK hynix announced semiconductor investment plans worth about 1,500 trillion won, including 800 trillion won for building semiconductor production bases in the Honam Region alone. When long-term investment plans disclosed by companies are added, the total investment amount reaches about 4,700 trillion won.

km@fnnews.com Kim Kyung-min Reporter