In an investment that is the largest of its kind, South Korea announced its investment of nearly half a trillion dollars (about 470 billion dollars) to establish a complete electronic chip manufacturing cluster, with an area exceeding 30,000 football fields! With this huge gathering, Korea aims to create a system of institutions related to this industry, by building 13 new factories and 3 research laboratories, to complement the 19 existing factories and two research laboratories. The construction of the two research laboratories and three factories is scheduled to be completed by 2027, while the time limit for the entire project has reached 2047. What are Korea’s motives behind this announcement? What are the Korean capabilities that enable it to complete a project of this magnitude?
The technology sector is the main driver of the Korean economy, and Korea is home to major manufacturers of electronics in general and semiconductors in particular. In 2022, Korea exported about $129 billion in semiconductor goods, equivalent to 19 percent of its national exports. Korea relies on this commodity for exports and local manufacturing as well, whether in cars, electronic devices, smartphones…etc. Through this project, it aims to raise self-sufficiency in semiconductors from 30 percent to 50 percent by 2030. The production capacity of this cluster is supposed to reach about 7.1 million chips per month, i.e. the largest in the world. It is also expected that this project will create Between 3 to 3.5 million jobs.
Korea is investing in many regions around the world in these factories, the most recent of which was Samsung’s investment to build an electronic chip factory in the US state of Texas at a cost of $17 billion, encouraged by the Chips and Science Act launched by the administration of US President Joe Biden to provide financial incentives for this industry worth $53 billion. dollar.
But Korea’s experience in China taught it that investing in its territory is safer than abroad. After the Korean company “EK Hynix” bought a factory in the city of Dalian, north of China, from its American counterpart, “Intel” in 2020, this investment collided with the American restrictions imposed on China. Which limited China’s access to basic materials and equipment in this industry, which frustrated the expansion plans of the Korean company.
Therefore, the Korean government decided to encourage domestic investment in this industry in response to global changes in it. It issued a promise in which it stressed its continued support for this industry, extending the tax exemptions that were scheduled to expire this year indefinitely, and increasing these exemptions to reach 15 percent for large companies investing in factories, and 25 percent for small and medium-sized companies.
The success of this huge project is supported by many factors. This industry is supported by more than 40 years of experience in Korea, which is what distinguishes it most from China in this field, as well as by huge companies such as “Samsung” and “EK Hynix”, which have a clear desire to invest in this project. Samsung alone has invested about $375 billion in it. Skilled labor and scientific expertise are available in South Korea, supported by ancient universities and distinguished research centers.
These huge investments are driven by expectations of a rise in global demand for semiconductors, whose sales in 2022 exceeded $600 billion, and are expected to reach $630 billion this year, and more than a trillion dollars in 2030.
In light of the growth of data centers, storage, and artificial intelligence applications, the contribution of these activities to electronic chip sales is expected to increase from 100 billion in 2022, to about 250 billion in 2030. Sam Altman, CEO of Open AI, stated that there is no real Enough microchips to meet his company’s needs. Altman visited South Korea last week and met with the manufacturers of these chips.
Korea’s huge investment in electronic chips is for economic and strategic goals, as its local industries depend on them, and they are the most important pillar of its economy. Korea has become a global house of expertise in this industry, and has created an integrated system in which millions of Koreans with high qualifications and rare experience work. It is clear from the global trend that the importance of these chips is constantly increasing, and their strategic importance as an essential element in artificial intelligence only increases their strength. Therefore, the government announcement of this huge investment, with all the legislative, financial and political support, is justified and understandable, as this industry is the future of the world that Korea seeks to be at the heart of.
2024-01-29 00:11:58
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