South Korea's semiconductor industry is making a fortune.

Once South Korea laid the foundation for the development of its semiconductor industry through shopping in the field of storage. South Korean semiconductor manufacturers, such as Samsung and SK Hynix, have grown up here and play an important role in the global semiconductor industry chain.

With the advent of the era of 5G and artificial intelligence, driven by new application scenarios, the global semiconductor pattern is facing possible changes. Under the competition in the new semiconductor market, we see that the Korean semiconductor industry is trying to reduce its dependence on storage products and expand its influence in the semiconductor field.

Enter into the field of automotive semiconductors

According to relevant data, the world's five most important players, namely NXP, Infineon, Renesas Electronics, Texas Instruments and Italian and French Semiconductors, accounted for 73% of the market in 2017, but the market share fell to 49% in 2019, according to the market situation, citing Korea Automotive Technology Research Institute. According to data provided by IHS Markit, the global size of automotive chips will be $41.8 billion in 2019 and is expected to increase to $65.5 billion by 2024. It can be seen from these data that with the expansion of the automotive semiconductor market, more players have joined the competition, which also provides market opportunities for South Korean related companies to enter automotive semiconductors.

Taking advantage of this market opportunity, South Korea began to attach importance to investment in the field of automotive semiconductors. In the implementation of the system semiconductor development strategy announced by the South Korean government, automotive semiconductor is one of the key points of the strategy. It is reported that this part of the task is the responsibility of the Korean Ministry of Science and Technology Information and Communications. In 2019, South Korea's Ministry of Science and Technology Information and Communications announced investment plans for the next three years, according to which the South Korean government will invest 14.3 billion won ($12.2 billion) in the development of artificial intelligence semiconductors for self-driving cars over the next three years.

Samsung's Exynos Auto chip and ISOCELL Auto sensor are a representative of South Korea's foray into automotive semiconductors. It is reported that the, Exynos Auto chip will provide customized services to cars through processors to meet the needs of automakers in developing applications such as infotainment, advanced driving assistance systems and remote information processing. And ISOCELLAuto is that Samsung hopes to enter the field of automotive semiconductors from the field of CIS.

Although South Korea has long made a layout for the automotive semiconductor industry, according to a recent report by BusinessKore, South Korean semiconductor manufacturers such as Samsung Electronics and SK Hynix have a 60% market share in the global memory chip market, but the system semiconductor market accounts for only 3% or 4% of the market. Although South Korea's auto industry is well developed, automakers are highly dependent on foreign-made on-board chips.

Especially in the case of shortage of automotive chips last year and this year, this situation has stimulated South Korea to develop the automotive semiconductor industry. Recently, it has been rumored that Samsung is interested in buying automotive semiconductor companies. NXP (NXP), Texas Instruments (TI) and Renesa Electronics (Renesas) are likely to be acquired by Samsung.

As we all know, there are many kinds of products involved in automotive semiconductors. in the process of automobile electrification, power devices have become one of the important components to realize electrification. On the other hand, the third generation semiconductors account for an increasing proportion of the power devices used in automobiles. Therefore, there are also some semiconductor companies in South Korea that are aiming at the field of SiC power devices.

SK Group is one of them. According to recent news, SK Holdings, a subsidiary of SK Group, announced the acquisition of shares in Yes Power Techniques, a power semiconductor manufacturer. In addition, in the face of the rise of the future third-generation semiconductors, South Korea began to attach importance to its investment in semiconductor materials after trade tensions between South Korea and Japan last year. The rise of the third generation semiconductors represents an opportunity for a new material market. Therefore, while laying out SiC power devices, SK Siltron of the SK Group bought the silicon carbide (SiC) wafer business of American chemical giant DuPont (DuPont) for $450 million to expand the automotive power semiconductor market (but Global Wafer wants to buy SK Siltron, This may also be a variable in the development of SiC power devices by Korean semiconductors.

Semiconductor equipment market hidden behind wafer foundry

South Korean semiconductor companies are new players in the automotive semiconductor field, and as can be seen from the above BusinessKore report, it is not easy for new players to participate in this competition. The report also pointed out that Samsung also received few orders for contract manufacturing of automotive chips because most automotive semiconductors are customized, so automakers, IC design companies and wafer foundry must work closely together.

As we all know, wafer foundry is regarded as one of the key areas for the future development of South Korea's semiconductor industry. Samsung and SK Hynix and other South Korean semiconductor companies also have plans in the wafer foundry business, while they develop wafer foundry business, the related semiconductor equipment market also ushered in the spring.

South Korea is the fourth largest market for semiconductor equipment in the world in 2010, and its equipment market accounts for about 17% of the global semiconductor equipment market. As a link in the semiconductor industry chain, the related development in South Korea is also worthy of attention. According to the research report of Sino-Thai Securities, as early as 2009, South Korea began to focus on promoting seven commercial projects, such as low-temperature chemical vapor deposition, etching equipment, chemical and mechanical grinding equipment, key point measurement equipment, ion doping equipment and so on. At present, the strength of semiconductor equipment in South Korea is second only to Japan, Europe and the United States. According to the research report of SEMI USA, the technology gap between South Korea and the top equipment manufacturers in Europe, America and Japan is 2 years. SEMES, WONIK IPS and SFA (Korea Xinsheng FA) all have core equipment technology. Especially in the fields of deposition, etching and grinding, SEMES, KC Te ch, PSK has reached the international level.

Especially after the changes in the trade situation between Japan and South Korea, supporting the equipment investment of key foundry enterprises has become one of the plans of the South Korean government's "Vision and Strategy of system Chip Industry". Under the trend of localization, South Korean equipment manufacturers have also grown-the South Korean government announced in July 2019 that it plans to provide a budget of 1 trillion won a year to support the localization of semiconductor materials and equipment.

According to relevant statistics, there are a total of 57 semiconductor and panel equipment companies listed in South Korea, which does not include SEMES, the largest semiconductor equipment company in South Korea, which is also a company under Samsung Group.

In addition, South Korean semiconductor companies are also interested in supporting the development of their own semiconductor equipment manufacturers. Last year, SK Haili adopted the equipment of Nextin, a local semiconductor process testing equipment manufacturer. According to related reports, Nextin has ensured that SK Hynix and Magna Chip Semiconductor are customers. Since 2019, it has also supplied equipment to Samsung Electronics's system semiconductor production line, and Chinese manufacturers will also purchase equipment from it.

On the other hand, due to the changing relationship between global trade, the supply chain of global semiconductor equipment has also changed. And Korean manufacturers may be able to make a profit in this process, so the influence of Korean semiconductor equipment may also be further expanded.

The strength of 5G is not weak.

In addition to expanding into the field of automotive semiconductors, South Korea also has great strength in the 5G market.

From the perspective of the domestic 5G process in South Korea, the three major Korean telecom operators, SKT, KT and LGU+, have announced the provision of 5G services in April 2019, which makes South Korea the first country in the world to achieve 5G commercial use.

From the perspective of the global 5G market, Samsung ranks seventh in the market share of global TOP telecom equipment manufacturers in the first half of 2020 released by Dell'Oro Group. While the trade relationship between China and the United States has changed, it also provides an opportunity for South Korean manufacturers to develop in the international market. Samsung Electronics in the United States has reached a supply agreement of 7.9 trillion won ($6.7 billion) with US operator Verizon, which will provide wireless communications solutions in the United States, Yonhap news agency reported.

At the same time, to counter Huawei's influence in the 5G market, South Korean companies are also involved in the construction of OpenRAN, a technology called Open Wireless access Network (OpenRAN), which can reduce the cost of building 5G base stations.

Samsung is also actively promoting the development of Open RAN. Last year they launched an open and virtualized 5G RAN product and planned to conduct field trials in North America. It is reported that Samsung's move is aimed at grabbing Ericsson's share in the US market. From this, it can also be seen that South Korean manufacturers are actively expanding their 5G influence outside their own country.

In addition to seizing the market by adopting new technologies, Samsung also announced last year that it had completed the acquisition of TeleWorld Solutions (TWS), an American company, to strengthen its presence in the US 5G market in order to further expand into other countries. According to related reports, according to the deal, TWS will operate as a wholly owned subsidiary of Samsung Electronics USA. At the same time, Samsung can gain expertise in designing, testing, and optimizing services for mobile services, cable operators and OEM device manufacturers.

Judging from its achievements, Samsung has signed 5G equipment supply agreements with Verizon, AT&T and Sprint. Derek Johnston, a Samsung executive, said at a recent exhibition that Samsung's success in the US market was partly due to the company's willingness to accept emerging plans from operators such as Open RAN technology.

On the other hand, in addition to the base station market, the 5G mobile phone market is also another manifestation of South Korea's strength in the 5G market-Samsung ranks first in the US 5G smartphone market share in 2019, according to Counterpoint.

Conclusion

With the change of the global semiconductor pattern, South Korea is developing from a semiconductor country famous for storage to an integrated semiconductor power.

From the business that is well known by the industry, in the field of storage, production expansion is one of the important means to consolidate Korean semiconductor enterprises in this field. According to past reports, Samsung is expected to invest $7 billion over the next three years to expand NAND flash chip production at its Xi'an plant in China. In addition, SK Hynix acquired Intel's NAND flash and storage business last year. The acquisition includes the Intel Dalian chip plant in Dalian Jinpu New area. According to the recent cooperation memorandum of understanding signed between SK Hynix and the Dalian Jinpu New District Management Committee, SK Hynix will continue to invest and build after acquiring Intel Dalian chip plant. Judging from their actions, the Korean storage business is tilting towards NAND, and their factories in China may be an important part of expanding their influence in this area.

Apart from the storage sector, the development of artificial intelligence may be the driving force for South Korea to build a power of integrated semiconductors. According to relevant reports, the South Korean government issued the "Development Strategy of artificial Intelligence Semiconductor Industry" at the end of last year, planning to achieve the goal of "artificial intelligence semiconductor power" by 2030 and formally cultivate artificial intelligence semiconductors into a "second DRAM" industry.

The development of cars in the direction of intelligence may be a breakthrough in the development of artificial intelligence semiconductor industry in South Korea. As a result, there is a demand for devices, chips, wafer foundry and semiconductor equipment. Especially at a time when localization is emphasized, South Korean semiconductor enterprises have also ushered in new development opportunities. South Korea's existing leading semiconductor manufacturers are their advantage in developing the local semiconductor industry chain. Breaking into the supply chain of these leading semiconductor enterprises will not only speed up their localization process, but also help their local manufacturers to expand their popularity in the semiconductor industry. So as to enhance the influence of South Korea's semiconductor industry as a whole.

From many segments, South Korean semiconductor companies may not be the best one, but if you take a closer look, they can all rank in the top five in the industry segment. Under the situation of great competition in the global semiconductor industry, Korean semiconductors, which seem to be "not prominent", have quietly made money from the global semiconductor industry.