South Korea Mulls Publicly Funded Foundry to Counter TSMC Dominance

2024-12-26

Samsung Foundry has faced significant challenges in recent years, struggling to compete with TSMC in the advanced node market. This has led to financial losses and even production line closures. While Samsung has implemented strategies to revitalize its foundry business, a new threat may emerge: a potential government-backed competitor.

During a recent seminar at the National Academy of Engineering of Korea (NAEK), a proposal was put forth to establish a publicly funded foundry, tentatively named KSMC (Korea Semiconductor Manufacturing Company). Ahn Ki-hyun of the Semiconductor Industry Association advocated for a substantial government investment of 20 trillion won ($14 billion) in this endeavor. Experts predict that this investment could generate economic returns exceeding 300 trillion won ($208 billion) by 2045.

The inspiration for KSMC lies in

Concerns were raised about KSMC’s ability to compete effectively in high-end chip manufacturing. SK Hynix CEO Kwak No-jung suggested repurposing some of Samsung’s existing facilities to facilitate this venture.

Samsung Foundry, under the leadership of Han Jin-man, is pursuing a two-pronged strategy: enhance competitiveness in advanced nodes while expanding its customer base for legacy (10nm) processes. However, the emergence of KSMC could potentially limit Samsung’s ability to capitalize on its legacy node business.

Despite these potential challenges, it is unlikely that the South Korean government will ignore Samsung’s concerns, given the company’s crucial role in the nation’s economy and semiconductor industry.

What Undercode Says:

The proposal for a government-backed foundry in South Korea presents a complex scenario with significant implications for the global semiconductor landscape.

Potential Benefits:

Increased Competition: KSMC could introduce healthy competition, potentially driving innovation and price reductions across the industry.

National Security: A domestic foundry would enhance South

Economic Growth: The potential economic returns predicted for KSMC could significantly boost the South Korean economy.

Potential Challenges:

Funding and Execution: Securing and effectively utilizing the substantial government funding required for KSMC will be critical.
Technological Expertise: Developing and maintaining cutting-edge manufacturing capabilities will be a significant hurdle for a new entrant like KSMC.
Impact on Samsung: KSMC could negatively impact Samsung Foundry’s profitability, particularly in the mature node market. This could hinder Samsung’s ability to invest in future R&D and compete effectively against TSMC.

Government’s Role: The South Korean government must carefully weigh the potential benefits and risks of this initiative. A balanced approach is crucial, one that fosters competition while ensuring the continued success of its existing semiconductor industry leaders like Samsung.

The creation of KSMC could reshape the global semiconductor landscape, potentially leading to a more diverse and competitive market. However, the success of this ambitious project will depend on careful planning, significant investment, and a collaborative approach between the government, industry players, and academia.

This analysis provides a preliminary perspective on the potential implications of the KSMC proposal. Further research and in-depth analysis are necessary to fully understand the potential impact on the global semiconductor industry and the South Korean economy.