ⓒ Getty Images Bank

Semiconductors are often described as the rice of the industry. Going through the complicated manufacturing process, they are used in diverse areas in daily life, including vehicles, smartphones and software. As the world is faced with the fourth industrial revolution and the upheaval of the COVID-19 pandemic, semiconductors are becoming increasingly important. 

Countries around the world are scrambling to foster their own semiconductor industries, with the U.S., Taiwan, China and Japan making a massive investment in this industry. Here is Park Jea-gun (박재근), president of the Korean Society of Semiconductor & Display Technology, to discuss the global competition for semiconductor hegemony. 

Amid the pandemic, demand for smartphones, TVs, PCs and cars has exploded, leading to shortages of automobile and IT semiconductors. IT chip manufacturers have built additional production lines to resolve the supply problem to some extent. For automotive semiconductors, however, the supply shortage is expected to be eased in the fourth quarter of this year. 

On top of the changing consumer trends in the pandemic, fires broke out at some semiconductor factories around the world, while lockdown measures were implemented to prevent the further spread of COVID-19. All these factors contributed to the global semiconductor shortages. Many countries feared that they might fail to cope with the fourth industrial revolution properly due to the pandemic-induced chip shortages, although analysts predicted that the situation would stabilize slowly. The fears prompted them to set a goal of dominating the semiconductor market independently. It was the U.S. that initiated the drive. 

As of 1990, the U.S. accounted for 39 percent of global semiconductor sales and 37 percent of production. In 2019, the U.S. share of chip sales increased to 47 percent, but its production share fell by one-third to 12 percent. As it has become more dependent on Taiwan’s TSMC for production, U.S. Congress passed the CHIPS for America Act that would provide 52 billion dollars to the local semiconductor industry for five years from 2022. In a move to increase chip production within the U.S. and seize semiconductor hegemony, the U.S. plans to bring foreign chip manufacturers to the U.S. and develop the next-generation semiconductor technology. 

The U.S. aims to regain its leading position in the semiconductor market. On the back of the government’s full support, the U.S. chip maker Intel announced its decision to expand its business scope. It seeks to explore the foundry market again by securing Qualcomm, the world’s largest telecommunication chip company, and Amazon Web Services as its customers. In doing so, Intel hopes to secure the industry’s top technology in four years. 

Taiwan Semiconductor Manufacturing Company or TSMC is by far the largest foundry in the world. In the first quarter of this year, TSMC accounted for 55 percent of the global foundry market, while the runner-up Samsung Electronics held a share of 17 percent. TSMC has said that it will make active investment overseas, including Germany, although it added that talks are still in the early stages. 

As part of its plan to reenter the foundry business, Intel will invest 20 billion dollars to build foundry plants in Arizona. It is considering a deal worth about 30 billion dollars to buy GlobalFoundries in order to enter the foundry business for IT and automotive semiconductors. Intel aims to catch up with or even outstrip the technology of TSMC and Samsung Electronics by 2025. 

TSMC, meanwhile, plans to invest a staggering 100 billion dollars in its foundry business over the next three years. The company has decided to construct a chip factory in Arizona and to spend 2.8 billion dollars in expanding its production lines in Nanjing, China, for the supply of automotive semiconductors. Separately, it is considering setting up a factory in Japan and a foundry plant in Germany. 

At present, Intel falls behind in the process technology. But it has strength in chip design and advanced packaging technology. So, a fierce technology competition is anticipated among TSMC, Samsung Electronics and Intel. 

While TSMC and Intel are engaging in a “war without guns” over semiconductor dominance, China and Japan have unveiled policies aimed at supporting their own semiconductor industries. China has mapped out a mid-and long-term vision for 2035 with a goal of becoming a semiconductor powerhouse. It aims to nurture local semiconductor makers by securing relevant materials, equipment and manufacturing technology despite the sanctions imposed by the U.S.  Japan, for its part, announced its strategy to support the local semiconductor industry on two different occasions in June alone. Under the strategy, it plans to build a system to mass-produce advanced chips. 

Semiconductor Manufacturing International Corporation or SMIC, which is China’s leading foundry firm, is a few years behind TSMC and Samsung Electronics in terms of technology. The Chinese company ordered equipment from ASML in the Netherlands to upgrade its technology to a 7-nanometer process or under, but it couldn’t receive it due to U.S. sanctions. As long as the sanctions remain in place, it seems China will be unable to enter the foundry business to produce below 7nm chips, which are necessary for fourth industrial revolution businesses. Nevertheless, China will continue to develop semiconductor technology and attempt to enter the market. 

Japan is considering setting up a foundry plant for IT and automotive semiconductors in the country in cooperation with TSMC. In Japan, cars with internal combustion engines are being replaced by autonomous electric vehicles. While 200 to 300 chips are used for internal combustion engine vehicles, EVs will likely need some 3,000 chips, ten times more than those needed for conventional cars. To raise competitiveness of its EVs, Japan seeks to establish and run a foundry plant for automotive semiconductors inside the country. 

With countries around the world announcing their semiconductor visions, attention turns to the strategies of Korean chip producers. Samsung Electronics, the world’s largest memory chip maker, has already set a goal of becoming the world’s foundry leader in 2030. During the South Korea-U.S, summit in May, the company confirmed investment worth 17 billion dollars in its second foundry plant in the U.S. Construction is also underway in Pyeongtaek, Gyeonggi Province and in Xian, China. Another local chip maker SK hynix has also built plants in Icheon, Gyeonggi Province and Wuxi, China, to contribute to promoting a foundry ecosystem. 

Samsung Electronics’ foundry lines in Hwasong produce 7nm and 5nm chips. Its Pyongtaek Line 2 plans to mass-produce application processors using the 5nm process from the third quarter of the year. Samsung has started constructing Pyeongtaek Line 3 as well. 

SK hynix, meanwhile, decided to pay 9 billion dollars to acquire the Intel NAND business. The company set up a foundry unit called SK hynix system IC in order to reinforce its IT semiconductor business. It is also considering taking over a domestic firm called Key Foundry. 

Businesses related to the fourth industrial revolution are growing fast, and governments around the world are eager to support the relevant industries to predominate the new markets. To stay ahead in the market for semiconductors used in the fourth industrial revolution businesses, the Korean government also needs to give extensive support to the local industry for more than five years.

Semiconductors are used in various areas related to the fourth industrial revolution, including AI, big data, robots and drones. The real battle for global semiconductor dominance has started now.