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Samsung’s HBM2 semiconductor. (courtesy of Samsung Electronics)

The US-based Semiconductor Industry Association (SIA) has concluded that South Korean companies will account for nearly 20% of global semiconductor production by 2032, surpassing Taiwan and moving from third to second place. As of 2022, South Korea is in third place, following China and Taiwan. However, the association predicted that as the US aggressively invests in cutting-edge semiconductor production and fabrication plans in the coming years, Korea’s share in the sector is likely to shrink.

SIA and the Boston Consulting Group released a report on Wednesday titled, “Emerging Resilience in the Semiconductor Supply Chain.” According to the report, South Korea’s share of global semiconductor manufacturing capacity was around 19% in 2023, an increase from 17% in 2022 and the highest share of global manufacturing that South Korea has ever achieved.

In 2022, China’s share of global semiconductor manufacturing was 24%. Taiwan and Japan tied for third place at 18%. By 2032, however, China is forecast to slip to 21%, Taiwan to 17%, Japan to 15%, and the US to 14%. This would put South Korea in second place.  

An expected increase in production facilities was cited as a key reason for this forecast. SIA predicted that South Korea’s production capacity will increase by 129% within the next eight years. This is a greater increase than forecasts for Europe (124%), Taiwan (97%), Japan (86%) and China (86%). 

“South Korea invested early in the development of its semiconductor industry and supported the growth of Samsung and SK Hynix into global semiconductor leaders,” the report stated. 

“South Korea has announced a plan to invest $471 billion through 2047 to build 16 new fabs in a mega-chip cluster in Gyeonggi Province, involving Samsung, SK Hynix and other chip companies,” the report added. 

South Korea’s share of logic chips at processes newer than 10 nanometers, however, is forecast to fall from 31% to 9%. In the same period, Taiwan’s share is expected to fall from 69% to 47%. 

The US CHIPS Act promises US$39 billion in grant incentives, US$13.2 billion for R&D and workforce development, and a 25% investment tax credit for semiconductor manufacturing — a total of US$52.7 billion. By 2023, US semiconductor production capacity is expected to increase threefold (203%) compared to 2022 levels, with its market share increasing from 10% to 14%. 

“In the absence of action [CHIPS Act], the US share would have slipped further to 8% by 2032,” the report stated, adding that the US share of logic chips less than 10 nanometers is expected to go from 0% in 2022 to 28% in 2032. 

In a press conference at the presidential office on Thursday, South Korean President Yoon Suk-yeol declared, “Our administration has pursued tax policies that would bolster the competitiveness of the domestic semiconductor industry, despite criticisms that we are merely pursuing ‘corporate tax incentives’ and ‘tax cuts for the wealthy.’”

“We consider time to be the ultimate subsidy, and therefore seek to relax regulations and aid the speedy progress of the industry,” Yoon added. 

“Tax cuts and incentives basically equate to subsidies,” Yoon said.

“We will pursue and bolster support measures that boost the competitiveness of domestic firms, so long as they fall within fiscal responsibility,” he added. 

SIA looked at the incentive structures for the semiconductor industries of various countries. South Korea offered US$55 billion in tax incentives. China offered a fund of US$142 billion. Japan offered US$17.5 billion in grants. Taiwan offered US$16 billion in tax incentives. 

By Kim Kyung-wook, staff reporter

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