South Korea Plans KSMC Chip Foundry to Compete with TSMC

According to reports, despite Samsung's foundries being the leading chip manufacturing players, the South Korean government is considering the establishment of a government-funded semiconductor foundry, tentatively named Korea Semiconductor Manufacturing Company (KSMC). This initiative has been proposed by industry experts and scholars.

Ahn Ki-hyun, a representative of the Korea Semiconductor Industry Association, has urged the government to make long-term investments in this venture. Experts predict that an investment of 200 trillion Korean won (approximately 13.9 billion USD) by 2045 could yield economic returns of up to 300 trillion Korean won (around 208.7 billion USD). However, a key concern is whether 13.9 billion USD would be sufficient to build a semiconductor manufacturer. Another concern regarding public-funded companies like KSMC is their ability to develop advanced manufacturing technologies and secure enough customer orders to achieve profitability. It has become clear that, in addition to semiconductor manufacturers, South Korea also needs more fabless software developers.

The proposal was introduced during a seminar hosted by the National Academy of Engineering of Korea (NAEK). The plan aims to address structural weaknesses within the industry, such as the over-reliance on Samsung's advanced 10nm nodes, particularly in the absence of mature process technologies. Due to the lack of diversity in South Korea's manufacturing sector, smaller system semiconductor companies struggle to thrive, much like the situation in Taiwan. In Taiwan, companies focused on mature and specialized nodes, such as UMC and PSMC, complement TSMC's advanced process technologies.

South Korea is the world's largest producer of memory chips, but it lags significantly behind Taiwan in logic process technologies and chip design, with no signs of improvement. The report highlights that key challenges facing the South Korean semiconductor industry include widening technology gaps with international competitors, a lack of investment attraction, sluggish growth in fabless companies, a shortage of skilled talent, and restrictive regulations. Seminar experts emphasize the urgency of addressing these issues to maintain South Korea's global leadership in semiconductors.

The CEO of SK hynix has proposed repurposing Samsung's older fabs for traditional process technologies. NAEK has called for strengthened research and development efforts, alongside financial incentives such as subsidies and tax credits. Other suggestions include reducing regulatory burdens, particularly regarding working hours. Engineers from TSMC have repeatedly stated that extending working hours contributes to the rapid development of advanced process technologies.

NAEK's initiative draws inspiration from Taiwan's semiconductor ecosystem, where more than 250 fabless companies thrive in the Hsinchu Science Park alone. By establishing KSMC with government support, South Korea could replicate Taiwan's success, providing resources for smaller companies to grow alongside industry giants like Samsung and SK hynix.