The world is in six-year war of investments in chips

Over the past three years, the U.S., the E.U., Taiwan, and Japan have announced plans to invest in semiconductor facilities in their regions, totaling 552.4 billion U.S. dollars. To realize these plans, countries are offering astronomical amounts of subsidies and tax incentives, sucking in investments like a black hole from global semiconductor companies, including Korean conglomerates. The common deadline set by developed countries is 2030, when the artificial intelligence (AI) revolution is expected to hit full swing and demand for semiconductors is expected to explode.

The Dong-A Ilbo and the Korea Institute of Industrial Economics and Trade have analyzed semiconductor capital investment plans announced in four regions, including the U.S., since 2021, to find that the U.S. is predominantly leading the way, attracting about 60 percent of the total. The Biden administration's semiconductor law, which provides hefty subsidies to companies investing in the U.S., has had a significant effect. Europe, Japan, and Taiwan accounted for 11 to 16 percent, respectively. There is a ‘war of investments’ by countries to secure semiconductor production facilities at all costs.

Most of the facilities investments will be completed before 2030. Intel's fab in Arizona, U.S., and TSMC's fab in Taiwan will be operational in the first half of next year. German automotive semiconductor company Infineon's Dresden plant is scheduled to be operational in 2026. Rapides, a joint venture of Japanese conglomerates, aims to start producing advanced 2-nanometer semiconductors at its Hokkaido plant in 2027. This means that the global division of labor in semiconductor production, which utilizes original U.S. technology and design, Japanese materials, and South Korea and Taiwan to make the final products, will collapse within a few years.

Things are moving quickly, but South Korea doesn't even have a timetable for national semiconductor investment. The government's plan to create a Yongin semiconductor cluster with 456 billion dollars by 2047, or 23 years from now, is on shaky ground from the very beginning. Construction of the SK hynix plant won't begin until next year, three years later than scheduled due to the relocation of residents and water supply issues. Moreover, unlike the U.S. and Japan where foreign companies account for more than 30 percent of the investment, South Korea relies mostly on domestic companies such as Samsung Electronics and SK hynix.

The Korean government and companies need to jump into the race of speed for Korea to compete with advanced countries mobilizing their national capabilities to invest in semiconductors. The political circle is responsible for clearing all obstacles, including the extension of the K-Chips Act, which is set to sunset this year. If no one does their part, Korea's position on the semiconductor world map will be severely diminished when it is redrawn in six years.