The nations are making war-like efforts to win the chip race

Integrated circuits on a printed circuit board.

filonmar | E + | Getty Images

Tiny pieces of silicon with complicated circuits are the lifeblood of today’s economy.

These clever semiconductors set our internet connected world in motion. In addition to iPhones and PlayStations, they support the national key infrastructure and highly developed weapons.

But there hasn’t been enough of these lately to meet demand.

The reasons for the ongoing global chip shortage, which will last until 2022 and possibly until 2023, are complex and varied. However, the nations plan to pump billions of dollars into semiconductors in the coming years to secure supply chains and become more self-sufficient. The money goes into new chip systems and into research and development.

South Korea was the youngest country to announce a whopping investment in the industry last week. The country’s government said Thursday that South Korean won 510 trillion ($ 452 billion) will be invested in chips by 2030, the majority of which will come from private companies in the country.

Abishur Prakash, a geopolitical specialist at the Center for Innovating the Future, a Toronto-based consulting firm, told CNBC via email that it is “a war-like effort by South Korea to build future security and independence”.

“By building massive chip capabilities, South Korea will have the power to determine its own trajectory rather than being forced in a specific direction,” added Prakash. “This is also about not being dependent on China or Taiwan. By investing hundreds of billions of dollars, South Korea is ensuring that it is not tied to other nations for its critical technology needs.”

Through the so-called “K-Semiconductor Strategy”, the South Korean government said it would support the industry through tax breaks, finances and infrastructure.

In a speech on May 10, South Korean President Moon Jae-in said: “In the midst of the great changes in the world economy, semiconductors are becoming a kind of key infrastructure in all industrial areas.”

He added, “While we maintain our semiconductor industry’s status as the world’s best, we will protect our national interests by using the current semiconductor boom as an opportunity for another leap forward.”

But South Korea is not a leader on all fronts. “In terms of manufacturing capacity, Taiwan is number 1 and South Korea is number 2, with the US third and China rapidly winning,” Glenn O’Donnell, VP and research director at analyst firm Forrester told CNBC.

South Korea has a dominant lead in memory chips with a 65% share, thanks largely to Samsung, he said. He added that Asia as a whole dominates production, producing 79% of all chips produced on the continent worldwide in 2019.

O’Donnell said it was “hard to tell” whether the investment will help South Korea conquer the global chip manufacturing crown the way it wants. “This is a monumental investment, but the US, Taiwan’s TSMC and the Chinese are also investing heavily,” he said.

Deep pockets

South Korea’s investment is led by two of its largest chipmakers: Samsung Electronics and SK Hynix.

Samsung Electronics – the country’s largest chipmaker and rival to Taiwan’s TSMC – plans to invest 171 trillion won in non-memory chips by 2030 to increase the previous investment target of 133 trillion won announced in 2019.

SK Hynix, a semiconductor provider of dynamic random access memory (DRAM) chips and flash memory chips, plans to spend 230 trillion won over the next decade. A spokesman for SK Hynix told CNBC that the company will spend 110 trillion won on its existing manufacturing facilities in Icheon and Cheongju by 2030. It is also investing 120 trillion won in four new factories in Yongin to double the amount of chips it produces.

Prakash said the world should be shocked at the size of South Korea’s entire war chest. “With nearly half a trillion dollars and more than 150 companies involved, South Korea is moving mountains to secure its place in the future,” he said.

The US, China and the EU are also investing

South Korea’s promise comes after US President Joe Biden proposed a $ 50 billion plan for chip manufacturing and research, while China’s Xi Jinping pledged to spend on high-tech industries with a large emphasis on semiconductors. The EU announced in March that 20% of the world’s semiconductors would be manufactured in Europe by 2030, compared to just 10% in 2010.

“In the ongoing battle for technology supremacy, all nations are vying for that important designation as the world’s major supplier,” said Forrester’s O’Donnell. “South Korea, Japan, the US, Taiwan, the EU and China all covet this gold medal on the Tech Olympics podium.”

O’Donnell noted that it takes about two years to build a chip manufacturing facility or factory. “Each factory will cost more than $ 10 billion, but all the money in the world won’t fix the chip shortage quickly, nor will it guarantee the gold medal.”

He added, “Geopolitical tensions also play a role in dynamism. South Korea always lives under the threat of North Korea, which destabilizes its technical position if things get too hot in the DMZ. Taiwan, arguably the largest semiconductor supplier today, is faced a similar threat as tensions with mainland China escalate. “

Outside of South Korea, all major chipmakers have announced major investments of their own.

TSMC has pledged to spend $ 100 billion over three years to expand its manufacturing capacity, while Intel plans to build two new factories in Arizona at a cost of $ 20 billion. According to reports, both companies have also discussed a new European factory.

Chinese chipmaker SMIC said Friday it was working quickly to expand capacity, with some plans going ahead of schedule. Haijun Zhao, the CEO, said on a call for profits that semiconductor demand in every customer segment continues to outstrip supply.

SMIC saw sales jump 22% to $ 1.1 billion in the first quarter and increased its sales outlook for the first half of the year.

Source link

Posted in Tech

Leave a Comment

Thanks for visiting get comfortable with the space, consider donating all donations big or small entitle you to a free gift with free shipping.