[Column] Pass the chip bill Korea!

Kim Yong-suk

The author is a professor of electronic engineering at Sungkyunkwan University and vice president of the Institute of Semiconductor Engineers.

The government last month proposed a bill to expand tax incentives for chipmakers and other strategic industries. Though some compromises have been made to the Yoon Suk Yeol administration’s original scheme to raise tax credit rate for semiconductor facility investments since last year, the government’s push nevertheless is encouraging for the future of our chip industry.

Korea’s semiconductor industry faces an unprecedented crisis. The chip sector could prosper thanks to the efficiency of the global supply-chain structure. But since the global-wide chip shortage, major countries have been racing to bolster their chip manufacturing capacity on their home turf and expand their global market share. Korea’s supremacy in the memory chip sector in the global value chain has come under threat. Korea must do its utmost to defend its competitive edge in semiconductors.

The U.S. is out to reshape the global chip supply network by increasing its domestic capacity. The chip pivot pursued since Donald Trump’s administration is being pushed in a more exquisite — and consistent — manner under Joe Biden’s administration, with bipartisan support from the Congress.
 

 
China has been hampered to advance its chip development due to U.S. sanctions on chip equipment and technologies for nanometer processes. But it nevertheless is making big investments in the lower-level — yet mass-market — chips to elevate its self-sufficiency. As a result, China can increasingly wean itself off its reliance on Korean memory chips. China not only enhances its chip design capacity in system chips but also invests heavily in carbon-based composite materials that can replace silicon-based chips.

The perspective on the semiconductor industry must change. We must stop wasting time wrangling internally over favoritism for big companies, tax benefits for the super-rich and fairness with other industries. Instead, we must pay heed to the determination by major countries to foster their chip industries and to change policies to meet the demand of the times. The U.S., China, and Taiwan have all passed chip subsidization acts to motivate private companies to invest in the chip sector more than ever before.

Korea must keep ahead in facility investments to uphold its chip supremacy. First movers who hold patented technologies across the chip habitat poses a serious challenge to our chip industry. Chipmakers must persistently invest and upgrade facilities to maintain their competitiveness. Since it takes at least two years for a new facility to become fully operational, a timely preemptive investment is essential.

Korea’s long-held dominance in memory chips also came under threat. Micron Technology of the U.S., No.3 in the global market, pledged to invest as much as $100 billion over the next 20 years. Yantze Memory Technologies Corp. (YMTC) of China is rapidly catching up in flash memory capacity. Both the U.S. and China are intent on internalizing their memory chip production.

Semiconductors are a winner-take-all market. When the lead is overtaken, it is nearly impossible to recover. Japan never was able to return to its past glory in the chip rankings. Korea must not go down the doomed path.

The last half a century has never been easy for Korean chipmakers. The contest over chip supremacy has always existed, but it has never been so intense as today. The industry has never seen the government and chipmakers moving as one team in major countries. Corporate players cannot win on their own in the new playing field.

Korea must run faster to stay ahead of major chipmaking countries with full support from their governments. Due to the predominant share of semiconductors in the economy, Korea’s economy and security could be at risk if the country cannot defend its chip industry effectively. The situation demands a grave awareness from stakeholders. We must desperately find a solution to cope with the crisis. The legislature must end the wasteful wrangling and pass the tax incentive act quickly.

Translation by the Korea JoongAng Daily staff.