• By The Financial District


While the sales of Taiwan Semiconductor Manufacturing Co., which logged $12.9 billion in total revenue and $5.36 billion in operating profit in the first quarter, were smaller than those of Samsung Electronics, its operating profit was larger, as per a Korean Herald editorial reported through Yonhap News Agency.

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Samsung Electronics, on the other hand, posted 19.01 trillion won (US$16.9 billion) in consolidated semiconductor revenue and 3.37 trillion won in operating profit in the first quarter. Its revenue rose more than 7 percent, but its operating profit fell 16 percent year over year.

External factors, including the shutdown of a chip factory, called a fab, in Texas due to a power outage, dented Samsung Electronics' results, but it is concerning that a technology gap is cited as a more fundamental factor.

According to a recent survey of 100 semiconductor industry experts conducted jointly by the Federation of Korean Industries and the Korean Society of Semiconductor & Display Technology, Korea received failing grades in non-memory chips.

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On a scale of 0 to 100, with 100 for the world's top-level countries, Korea scored 59 points in semiconductor design for automobiles and 56 points in chip design for artificial intelligence.

Though Korea is on the world-leading level (92 points) in memory chips such as DRAM and NAND flash, it lags in system semiconductors, a high value-added field where demand is exploding thanks to the "fourth industrial revolution." It's worrisome. More concerning is the prospect of system chip industry leaders such as the U.S. and Taiwan further widening their gaps with Korea.

U.S. President Joe Biden vowed to rebuild America's semiconductor supply chain. In March when Biden unveiled a massive infrastructure investment package, he pledged to use $50 billion of it for semiconductor production and research. At a virtual meeting with 19 global firms including Samsung Electronics at the White House on April 12, he urged them to ramp up investment in the U.S.

Intel announced it will spend $20 billion to build two new chip factories in Chandler, Arizona.

TSMC reportedly plans to open six new foundries in the U.S. within three years, including one under construction in Phoenix, Arizona. U.S. "fabless" companies outsourcing the manufacturing of semiconductors will likely depend more on TSMC and weaken Samsung Electronics' position. TSMC also plans to open a research and development center and an advanced chip packaging facility in Japan. European countries and China are also seeking to strengthen their semiconductor industries.

Samsung Electronics may decide to expand foundry investments in the U.S., but it is unclear whether it will be able to run its chip business smoothly. It will be in trouble if semiconductor conflicts between the U.S. and China escalate and Washington raises pressure on Korean chipmakers to use U.S.-led supply chains rather than ones dominated by China.

Furthermore, the imprisonment of Samsung Electronics Vice Chairman Lee Jae-yong is a burden on the company when swift decisions on investment, technology development and marketing are needed.

Though belatedly, the government is working on steps to strengthen the nation's semiconductor industry. It reportedly considers offering more tax deductions for research and development and raising a fund to support the industry.

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However, such measures will not be so effective if the government fails to create an environment where companies can concentrate on investment. It is contradictory to take about support while doing little to lower investment barriers.

It took five years for Samsung Electronics to settle conflicts with residents over its request for the authorities to lay a 1.5-kilometer power transmission line to its chip factories in Pyeongtaek, Gyeonggi Province. The company promised to pay for the related construction costs.

SK Hynix reportedly decided to build two combined heat and power plants for its use at 1.7 trillion won out of concern about possible power shortages. Major countries are pushing ambitious plans to strengthen their respective chip supply chains. The global semiconductor industry has moved into the dimension of competition involving governments as well as companies.

The government must not end with support as usual. It must first create an environment where companies can focus on innovation and investment.


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