South Korea’s Semiconductor Market Share Weakens, Samsung’s Leadership Called Into Question

A sign is posted in front of a Samsung Electronics office in San Jose, Calif., on July 30, 2012. Justin Sullivan/Getty Images

A recent South Korean study shows the country’s semiconductor market share in China shrunk 5.5 percent compared to 2018, citing the effect of U.S. sanctions on China.

According to the Yonhap News Agency, the study was conducted by the Federation of Korean Industries (FKI), an economic association for domestic industries in South Korea. It analyzed the market share changes in China’s semiconductor imports in 2021 compared to 2018, the year before the United States imposed sanctions on China’s semiconductor industries.

The study indicated that South Korea’s semiconductor market share in China shrunk by 5.5 percent in 2021 compared to 2018, while Taiwan and Japan’s market shares increased by 4.4 percent and 1.8 percent, respectively. Among them, South Korea’s memory chip market share in China took the largest hit, a decline of 13.7 percent.

From April 2019 to September 2020, the U.S. Department of Commerce imposed several sanctions targeting China’s major tech firms, such as Huawei and SMIC. The sanctions prohibited companies worldwide from selling chips developed or produced using U.S. software or technology to select Chinese companies without first obtaining a license.

The report said that China’s total chip imports in 2021 shrunk 37.2 percent compared to 2018. Among them, its chip imports from Taiwan and Japan increased by 57.4 percent and 34.8 percent, respectively, while imports from South Korea only increased by 6.5 percent, suggesting that Taiwan and Japan are the main beneficiaries of U.S. sanctions on China.

The analysis attributed the leading cause of South Korea’s declining chip market share in China to Huawei stopping its imports of South Korean memory chips amid U.S. sanctions. As a result, South Korean memory chips saw a price decline, and exports to China shrunk 13.7 percent compared to 2018.

Amid South Korea’s weakening position in the global semiconductor competition, the head of FKI’s International Affairs Division, Kim Bong-man, called on the South Korean government to provide more support to its domestic semiconductor industries.

“Governments of the United States, China, Japan, and Europe have invested heavily in building their own semiconductor ecosystems and accelerating [their] supply chain restructuring. The South Korean government should also boost the competitiveness of its semiconductor industries by issuing supporting policies such as more R&D investment and tax incentives for domestic semiconductor firms,” Kim said.

Concerns Over Samsung’s Leadership and Dwindling Investment Plans

Many in South Korea’s tech industry have expressed concerns about the lack of a strong leader in Samsung Electronics, the country’s leading semiconductor giant, and how it impacts the company’s future, The Korea Economic Daily reported.

Lee Jae-yong, a business magnate and vice chairman of Samsung, is still serving his prison sentence. Although Lee was paroled last August, he is still unable to actively participate in Samsung’s business operations.

Samsung Electronics Vice Chairman Lee Jae-yong gets out of a car at the Seoul High Court in Seoul, South Korea, on Nov. 22, 2019. Ahn Young-joon/AP Photo

In 2017, Lee was jailed and charged with bribing a confidante of the once-imprisoned former president, Park Geun-hye, but was released in 2018 through an appeal to the Supreme Court.

However, through a retrial in January 2021, Lee was sentenced to two-and-a-half years in prison; his time already served will count toward the new sentence.

Presently, Samsung’s position in the field of semiconductors is weakening as it is increasingly challenged by its major competitors, such as Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest chip foundry. Samsung has reportedly been unable to narrow the gap with TSMC in recent years.

Samsung lags behind TSMC in terms of its investment plans in semiconductors.

In March 2021, TSMC announced plans to spend $100 billion over three years to expand its chip fabrication capacity, Reuters reported. This year, it plans to spend up to $44 billion as chip demand continues to surge, according to the Wall Street Journal.

The logo of Taiwan Semiconductor Manufacturing Co. (TSMC) in Hsinchu, Taiwan, on Jan. 19, 2021. Ann Wang/Reuters

Meanwhile, Samsung Electronics announced last year that it would spend about $151 billion by 2030 to take over the global foundry leadership from its archrival TSMC, according to The Korea Economic Daily (KED).

However, Samsung’s overall investment scale is smaller compared to TSMC. Thus far, it has only unveiled a $17 billion investment plan in building a new semiconductor manufacturing plant in Taylor, Texas.

Texas Gov. Greg Abbott and Kinam Kim, vice chairman and CEO of Samsung Electronics Device Solutions Division, announce that the chip-making company will build a $17 billion plant in Central Texas. Courtesy of Samsung

Seeing Samsung’s dwindling investment plans, many in South Korea’s tech industry have urged President Moon Jae-in to grant Lee a pardon before he leaves office on May 9, hoping to enable Lee’s full participation in the running of Samsung Electronics, KED reported.