Global Semiconductor Market and Outlook of Korea’s Semiconductor Exports
Since the 1980s, the semiconductor industry has continued to grow as semiconductors have been used as core components in computers and smartphones, with the global semiconductor market reaching USD 599.6 billion in 2022. The global semiconductor market is expected to decline by 12.3% to USD 525.9 billion in 2023 due to plunging demand for IT products and prices of memory semiconductors, but it is expected to recover to its previous market size in 2024. Korea's total semiconductor exports reached USD 129.2 billion in 2022, accounting for 18.9% of the country’s total exports. Semiconductors are leading the Korean economy and industry as the country’s No. 1 export product. Due to falling prices of memory semiconductors, which are Korea's main export item, semiconductor exports in 2023 are expected to reach around USD 100 billion, down 22.6% from the previous year.
Appeal of the Korean Semiconductor Market
Korea has the third largest semiconductor manufacturing facility following China and Taiwan, accounting for about 17.9% of the world's total semiconductor manufacturing capacity. The semiconductor manufacturing capacity of East Asia, combining Japan, Taiwan, and China, is about 79.3% of the global total. Korea with its geographical advantage, provides an optimal investment environment for companies looking to enter the East Asian semiconductor market.
With such sizable semiconductor manufacturing facilities, Korea is investing most actively in semiconductor manufacturing facilities, along with Taiwan and China, forming a huge semiconductor equipment/material market. As of 2022, Korea’s semiconductor equipment market accounted for 24.4% of the global market, and the country’s semiconductor materials market accounted for 18.3% of the global market. Considering that China’s share of 28.8% includes investments of Samsung Electronics and SK Hynix facilities located in China, the Korean semiconductor equipment/materials market is even larger than the figure suggests. Thus, Korea and Korean companies present great opportunities for producers of semiconductor equipment and materials.
Global Materials, Parts, and Equipment Companies Making Inroads into the Korean Market
Many global producers of materials, parts, and equipment are expanding into Korea to tap into the country’s leading semiconductor industry. Lam Research, a US company specializing in semiconductor etching and deposition equipment, has steadily increased its production in Korea since establishing Lam Research Manufacturing Korea in 2011, and opened a new 5170 m2 plant in Hwaseong, Gyeonggi-do in 2021. In 2022, the company plans to open the Lam Research Korea Technology Center to develop key technologies and equipment in Korea, playing an important role in strengthening the Korean semiconductor ecosystem. In addition, ASML, an exclusive supplier of advanced EUV lithography equipment, is building a state-of-the-art EUV cluster in Hwaseong, and semiconductor material manufacturers such as Tokyo Ohka, DuPont, Merck, and Ulvac are increasing their investment for production in Korea. In addition, many Korean small and medium-sized companies operating R&D businesses in each phase of the semiconductor process are collaborating in various projects with global companies doing business in Korea.
Government Policies to Support the Semiconductor Industry
The Korean government announced the K-Semiconductor Strategy (May 2021), the Semiconductor Superpower Strategy (July 2022), and the Strategy for Strengthening the System Semiconductor Ecosystem (March 2023) with a strong commitment to foster the system semiconductor sector as well as memory semiconductor and to emerge as a semiconductor powerhouse in all areas.
With a vision to build the world’s best semiconductor supply chain, the Korean government has increased tax support for investment in semiconductor facilities (15-25%) and R&D (30-50%), and is actively upgrading labor and environmental regulations to boost semiconductor investment. In addition, the government plans to provide more support in building infrastructure such as water supply and power systems in the semiconductor complexes of Pyeongtaek and Yongin, where the construction of new large-scale semiconductor factories are ongoing.
The government also plans to train 150,000 professionals and supply them to the semiconductor industry by 2030 by reforming regulations and providing financial support. It also plans to facilitate R&D cooperation between companies by forming clusters specializing in each field of semiconductor technologies.
By Ko, Jongwan( (jwko@ksia.or.kr))
Center Manager, Korea Semiconductor Industry Association (KSIA)
*This article is extracted from Invest KOREA information center, 2023.