KEI Spotlight

This article was published on The Korea Times on August 16, 2023.

For much of the past year there has been a focus on how the CHIPS and Science Act and U.S. semiconductor export controls impact the long-term viability of Korea’s semiconductor facilities in China. However, the growth of a competitive Chinese semiconductor industry and demands for production based on clean energy could be just as significant for Korean semiconductor companies.

Less often discussed, but relevant for Korea’s semiconductor industry, is the emerging competitive challenge from China. Beijing has invested significantly in the memory chip sector in an effort to achieve self-sufficiency. So much so that, according to a 2021 report by the Semiconductor Industry Association, Chinese subsidies and investments in its semiconductor industry have reduced the cost of production in Chinese fabs below those in other countries.

On the surface, Samsung and SK hynix have a significant lead on YMTC, perhaps China’s best hope for a domestic memory chip firm. Samsung and SK hynix have long dominated the memory chip segment and YMTC only had a 5 percent market share in 2021.

YMTC, though, may be a closer competitor than what it appears. Last year, YMTC initially received good news when Apple considered procuring from it upwards of 40 percent of the NAND chips needed for the production of iPhones. Apple had determined that YMTC could produce high-quality chips at a low price. While Apple often rotates its sources of memory chips, the addition of YMTC to Apple’s stable of suppliers would have reduced potential future sales for Samsung and SK Hynix. It would also signal to other companies the quality of YMTC’s chips.

In the end, U.S. semiconductor restrictions, along with U.S. political pressure, scuttled Apple’s efforts to purchase chips from YMTC. Korea benefitted as U.S. export controls put into question YMTC’s ability to acquire the equipment it would need for a new plant. However, China since then has provided YMTC with $7 billion in subsidies and reporting suggests that YMTC has been able to work with Chinese equipment producers to get the equipment it needs to open its new plant later next year.

To read the full article on The Korea Times, please click here.