Government Rules Holding Hynix Back

“Comprehensive semiconductor factories in which vast research, production, and management assistance workforce work together are a competitive edge for Korea because they enable fast decision-making.”

This is the common response of Japanese CEOs and scholars who toured Samsung Electronics’ Giheung semiconductor factory. Japan divides its factories into three or four places because of the danger of earthquakes.

Korea’s semiconductor industry is leading the world in management and factory complexes. Now, Korea may not be able to keep its edge because of government regulation.

The semiconductor industry is often referred to as the timing industry. They say that the price of new semiconductor product falls by one percent within a week of its release. It is the law of One Week, One Percent. In a year, the price falls by half.

The government hindered semiconductor companies’ timing with excessive regulations in the past. In early 2001, Dongbu Electronics started to negotiate with the government, agreeing to introduce a production line in its Guri factory in Eumseong-gun in Chungbuk.

In November 2003, the Water Quality Conservation Act was announced after five expert meetings and two discussions. It took almost two years before the factory of Dongbu Electronics was in classified in the growth management area, not the natural environment preservation area in which the Hynix Icheon factory was placed.

Samsung won approval from the government to expand its semiconductor factory in Hwaseong and Dongtan.

High-quality research development and skilled workers are essential to nurturing high quality semiconductors. To do so, a location that has many incentives, such as traffic, cultural environment, and education is important.

“Well educated workers do not come to regions other than the metropolitan areas. Regulation on metropolitan areas is making it difficult for us to hire employees,” said an industry source.

The Ministry of Commerce, Industry and Energy announced that it would give approval to Hynix to expand its factory in Cheongju but not to the Icheon factory.

Hynix initially planned to invest 13.5 trillion won in its Icheon factory and build three Guri processing semiconductor production lines. However, it will not be able to do so because of the government.

“If we cannot expand the Guri processing line that is essential in making next-generation semiconductors, our headquarters will have to leave Icheon some day. The location of the Cheongju factory is not good because other company’s factory is between the Cheongju factory and the new factory lot,” said a source at Hynix.

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