South Korea is striving for dominance in chip production by investing $470 billion in a semiconductor "mega cluster" outside of Seoul. The move comes as the US-China rivalry complicates supply chains.South Korea plans to build the world's largest semiconductor cluster in Gyeonggi Province by investing around $470 billion (€430 billion) over the next 23 years into the massive production park in partnership with major electronics companies Samsung Electronics and SK Hynix.

Also Read | Emmanuel Macron India Visit: Boosting Cooperation in Defence, Trade, Students' Mobility Set To Be Focus of Talks Between PM Narendra Modi and French President.

To support the plan, the government has proposed measures including tax incentives for investments and initiatives to boost competitiveness. South Korea aims to increase self-sufficiency in essential materials, parts, and equipment for chip production to 50% by 2030.

Also Read | Dog Attack in Scotland: Large ‘Bulldog-Type’ Dog Shot Dead After It Attacks Two Men in South Lanarkshire’s Hamilton.

South Korea currently dominates the production of DRAM and NAND memory chips, which are used for managing and storing data on devices on PCs, smartphones and SD cards, holding a global market share of over 60%. South Korea aims to increase its share of other chips and processors.

Samsung also seeks to overtake the Taiwan Semiconductor Manufacturing Company's (TSMC) leading position producing wafers, which are thin disks made up of semiconducting material, mainly silicon, that act as the first layer in creating semiconductor components.

The Taiwanese are the global market leader in the foundry business with the contract manufacturing of processors for other companies.

Larger than 30,000 soccer fields

President Yoon Suk-yeol has said that the ambitious "mega cluster" is expected to generate nearly 3.5 million jobs. To achieve this, he emphasized the necessity of expanding nuclear energy to meet the energy demands of the semiconductor sector.

A semiconductor "cluster" is a group of facilities that perform research and all production steps of semiconductors all in a single area. South Korea's cluster comprises various industrial zones in the province of Gyeonggi, with a total area of 21,000 hectares (52,000 acres), which is 21 million square meters, or the size of almost 30,000 soccer fields.

By 2047, plans call for an additional 16 production facilities to supplement the existing 19. Among these, three plants and two research factories are scheduled for completion by 2027.

According to the industry ministry, Samsung and SK hynix plan to produce 7.1 million wafers per month there by 2030.

"If we complete the construction of the semiconductor mega cluster at an earlier date, we will achieve the world's leading competitiveness in the chip sector and provide quality jobs for young generations," said trade and industry minister Ahn Duk-geun.

Samsung Electronics is set to invest 500 trillion won ($375 billion) in the project, allocating 360 trillion won for six new production facilities in Yongin, located 33 kilometers (20 miles) south of Seoul.

Additionally, 120 trillion won will be directed towards building three new factories in the Pyeongtaek production complex, situated 54 kilometers south of Seoul, along with three research factories in Giheung.

Official figures indicate that the second-largest chip manufacturer, SK Hynix, will contribute 122 trillion won to construct four new factories in Yongin.

Decoupling from China

With its long-term cluster plan, South Korea is responding to the changing climate in the semiconductor industry.

South Korea sees its chip industry at risk of losing importance in the power struggle between China and the USA. In 2022, South Korea exported semiconductor goods worth $129 billion, which accounted for around 19% of national exports.

A reduction in national production would hit South Korea's economy hard. "Korea is at the forefront of semiconductors, which creates economic opportunities but also makes companies vulnerable," said Troy Stangarone from the Korea Economic Institute in Washington.

The US is promoting the establishment of semiconductor production facilities with subsidies of $52.7 billion with the "CHIPS and Science Act." This is why Samsung is building a $17 billion chip plant in the US state of Texas.

At the same time, China is driving forward the development of its domestic semiconductor industry after the US severely restricted semiconductor exports.

At the same time, a new cluster of TSMC and Sony processor plants is being built on the main Japanese island of Kyushu. Meanwhile, OpenAI boss Sam Altmann is looking for producers of chips for the development and application of artificial intelligence.

Thanks to an indefinite special permit, South Korean manufacturers have so far been exempt from US restrictions and are allowed to export equipment and machinery to China. The Samsung plant for NAND memory chips in Xian and SK Hynix's NAND factory in Dalian benefit from this.

However, South Korean doubts about production in China are growing. On January 24, SK Hynix had to deny again that it was planning to sell the plant in Dalian, which it had only taken over from Intel for $9 billion in December 2020.

According to market researcher Bloomberg Intelligence, the US controls five of the ten stages of the chip supply and production chain, including etching, coating and doping, while Japan and the Netherlands control the remaining areas, such as wafer cleaning and lithography.

Thus, South Korea's key role as a chip manufacturer depends on technologies, materials and expertise mainly belonging to the US and its allies. South Korean manufacturers are therefore focusing on cooperation with US companies to strengthen their national production.

This article was translated from German

(The above story first appeared on LatestLY on Jan 24, 2024 09:00 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).