South Korea's semiconductor industry, a key sector accounting for 20% of national exports, is grappling with geopolitical tensions and uncertainties. Amid the tech trade war between China and the U.S., South Korea finds itself caught in the middle as the U.S. attempts to limit China's access to advanced chips with potential military applications. This situation has sparked concerns in Seoul and triggered intense lobbying efforts in Washington to safeguard South Korea's interests.
The nation's semiconductor powerhouses, Samsung (KS: 005930 ) and SK Hynix, which hold 36% and 25% of the global memory chip market respectively, face uncertainties as a temporary one-year export rule exemption nears its end. The companies have collectively invested over $52 billion in China, but their ties are strained under these geopolitical circumstances.
In response to these challenges, the South Korean government is working on developing a semiconductor 'mega-cluster' aimed at enhancing domestic chip production. President Yoon Suk-yeol acknowledged that geopolitical issues pose significant business risks, characterizing the chip competition as an all-out war.
Despite these uncertainties, Samsung recently announced a $17 billion investment for a new facility in Taylor, Texas. Meanwhile, SK Hynix’s share of revenue from China peaked at nearly 47% in 2019. The company also committed last year to making an $11 billion investment in a new plant in South Korea.
In a move to support the industry, Yang Hyang-ja, a South Korean lawmaker and former Samsung executive, has proposed tax cuts for chip makers.
After nearly a year's delay, South Korea has joined the U.S., Japan, and Taiwan in President Biden's proposed 'Chip 4' semiconductor alliance. This move signifies a strategic shift towards cooperation with other major chip-producing nations to ensure stability and growth in this crucial sector amidst ongoing geopolitical tensions.
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