‘Creative ecosystems’ is key to non-memory chip business

Samsung Electronics announced “Semiconductor Vision 2030” to achieve its vision to become global No. 1 leader in contract (non-memory) chips in addition to its dominance in memory semiconductors. According to the plan, Samsung will invest 133 trillion won by the year 2030, hire 15,000 resources. While memory chips store information, contract chips process information based on calculation and logical analysis. Korea, the dominant No. 1 in the memory market, remains in sixth place in the contract chip business after the U.S., Europe, Taiwan, Japan and China.

Despite efforts to promote the contract chip business over the past two decades, Korea has not been able to achieve noticeable outcomes. The contract chip market is twice the size of the memory semiconductor market and is higher in value, which is why U.S. company Intel withdrew from the memory market in the 1980s and instead focused on the non-memory chip business. With the fourth Industrial Revolution ahead, demand for non-memory chips in AI, self-driving cars and medical robot business will soar.

For the past several years, China has invested heavily in building industrial ecosystems for the non-memory industry, which was traditionally dominated by the U.S., eventually overtaking Korea. Chinese businesses have achieved strong growth in a short period, acquiring other semiconductor businesses, but its growth has been stopped by the U.S. Korea should not miss this opportunity at this critical juncture to dominate the global market.

Non-memory chips are completely different from memory chips. While memory is based on a process industry that requires massive investment and know-how, contract chips require human resources with technical expertise and creativity for success. Memory semiconductors rely on mass production of concentrated models, while non-memory chips are manufactured in small quantities over diverse models. Samsung has promised to invest 73 trillion won in R&D by 2030, but it cannot do it alone.

The government and academia need to lead efforts to nurture creative and competitive technical resources. The shortage of jobs issue prevalent across the economy as a whole is not relevant to software and other high-tech industries, where there is shortage of resources. The government needs to take initiative by increasing entrance quotas at computer science and semiconductor related studies at universities, which has remained the same despite increased demand. Samsung should build an ecosystem with relevant small businesses, which should boost Korea’s competitiveness in the Fourth Revolution era and create high-value jobs.