According to a report from Liberty Times, citing the Reuters, on Monday (11th), South Korea’s ruling party proposed a special semiconductor bill to provide subsidies for chip manufacturers and remove the national cap on working hours, addressing potential risks stemming from Trump’s threats of tariffs and chip-related measures.

The bill would allow some employees involved in R&D to work longer hours, exempting them from the labor law’s 52-hour weekly work limit, as noted by the report.

The report indicated that as Asia’s fourth-largest economy, South Korea is highly dependent on trade, with the semiconductor industry playing a critical role. According to the Reuters report, chips accounted for 16% of South Korea’s total exports last year.

One of the bill’s sponsors, lawmaker Lee Chul-gyu, stated that China, Japan, Taiwan, and the U.S. are all subsidizing manufacturers amid the semiconductor trade war between the U.S. and China, and this bill will help South Korean companies face these challenges, as indicated by the report from the Reuters.

Last week, according to the report, South Korean President Yoon Suk Yeol cautioned about the risks arising from Trump’s threat to impose steep tariffs on Chinese imports, which could lead Chinese competitors to lower export prices and undermine Korean chip companies in international markets.

The report noted that the ruling party’s bill comes as chipmakers like Samsung Electronics face increasing competition from rivals in Taiwan, China, and other countries.

On the other hand, the report pointed out that the bill proposed by the ruling party still requires approval from the main opposition party to pass.

Samsung’s labor union has also voiced opposition, arguing that the company is using the law as an excuse for its “management failure,” as the report noted.

The report pointed out that, last month, Samsung issued an apology for its disappointing profits, acknowledging that it had fallen behind competitors TSMC and SK Hynix in capitalizing on the surging demand for AI chips.

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(Photo credit: Samsung)

According to a report from Business Korea, South Korea’s semiconductor industry is under growing pressure from the intense R&D efforts of Taiwan, Japan, and the U.S., as South Korean engineers work fewer hours compared to their global counterparts, due to current labor regulations.

The report pointed out that in order to keep the competiveness of companies like Samsung Electronics and SK Hynix, reforms in labor market flexibility are necessary.

The report, citing data from the semiconductor industry and the Ministry of Employment and Labor in South Korea, noted that the average monthly working hours for employees in South Korean businesses with one or more full-time workers is 156.2 hours. This is fewer than the 180.3 hours worked by Taiwanese employees as of August 2024.

According to the data, the report emphasized that compared to Taiwanese workers, South Korean workers work three days less per month. The report highlighted that the shorter working hours of South Korean employees could weaken the country’s R&D competitiveness, as companies like Taiwan’s TSMC or the U.S.’s NVIDIA expect employees to work around the clock when necessary.

The report noted that engineers in South Korea face legal restrictions preventing them from working beyond a set time. These reduced working hours, imposed by labor regulations, could threaten the competitiveness of South Korean tech companies. The report also highlighted that, although South Korea currently holds a fragile lead in the memory semiconductor sector, this position is at risk of being overtaken.

According to the report, South Korea’s strict labor regulations, including a 52-hour workweek limit introduced in 2018, were intended to promote work-life balance. However, there is increasing concern that these regulations may impede economic growth and innovation, particularly in high-tech sectors such as semiconductors.

(Photo credit: Samsung)

The global semiconductor market is nearing the end of its inventory cycle. With the rise of AI-related applications, new energy vehicles, 5G, high-performance computing, and other emerging sectors, industry experts estimate that the global semiconductor industry could reach a valuation of $1 trillion by around 2030.

Recently, new signals have emerged from various regions globally, including China, South Korea, and Japan. Based on the changing data, the growth in different sectors reflects shifts in supply and demand, indicating a widespread recovery trend in the semiconductor industry.

South Korea: Memory Chip Exports Surge by 60.7% YoY

On October 14, local time, data from South Korea’s Ministry of Science and ICT showed that boosted by record semiconductor sales, South Korea’s ICT (Information and Communication Technology) exports in September 2024 increased by 24% year-on-year to 22.36 billion USD(about 160 billion RMB), marking the 11th consecutive month of growth and the second-highest monthly figure on record.

In the semiconductor sector, South Korea’s semiconductor exports amounted to 13.63 billion USD (about 96.5 billion RMB) in September 2024, a historical high, with a 36.3% year-on-year increase.

Notably, memory chip exports surged 60.7% year-on-year to 8.72 billion USD, a nearly 20% increase compared to the previous month. System semiconductor exports rose 5.2% year-on-year to 4.37 billion USD. The Ministry highlighted that the demand for high-bandwidth memory (HBM) and other high-value-added products has fueled significant growth in memory semiconductor exports.

South Korea is home to two of the world’s largest memory manufacturers: Samsung Electronics and SK Hynix. According to TrendForce, Samsung and SK Hynix occupy the top two spots globally in the DRAM and NAND Flash markets, followed by Micron. Hence, South Korea’s semiconductor sector remains a focal point for the industry.

Additionally, the memory market has experienced significant fluctuations this year, with concerns about future trends.

TrendForce data indicated that before the third quarter of 2024, demand for consumer products remained weak, with AI servers driving the primary demand for memory. However, as HBM gains more market share, it is crowding out the capacity for existing DRAM products, leading suppliers to maintain certain pricing levels for contracts. Although server OEMs have maintained momentum in placing orders, smartphone brands are still cautious.

TrendForce forecasts that the growth rate of memory prices will significantly slow in the fourth quarter. Conventional DRAM prices are expected to increase by 0% to 5%, but with HBM accounting for a larger proportion of sales, the overall DRAM price is estimated to rise by 8% to 13%, marking a noticeable slowdown compared to the previous quarter.

China: Integrated Circuit Exports Grow by 22%

According to recent statistics from Chinese customs, China’s total imports and exports reached 32.33 trillion RMB in the first three quarters of 2024, up by 5.3% year-on-year. Of this, exports grew by 6.2% to 18.62 trillion RMB, and imports increased by 4.1% to 13.71 trillion RMB.

In terms of exports, China’s exports of mechanical and electrical products reached 11.03 trillion RMB in the first three quarters, an increase of 8%, accounting for 59.3% of total exports. Notably, high-end equipment exports grew by 43.4%, while exports of integrated circuits, automobiles, and household appliances rose by 22%, 22.5%, and 15.5%, respectively.

In terms of imports, China’s integrated circuit and auto parts imports grew by 13.5% and 4.6%, respectively, in the first three quarters. Consumer goods imports exceeded 1.3 trillion RMB.

Regionally, China’s trade with over 160 countries and regions has grown, indicating steady diversification. Trade with Belt and Road Initiative countries reached 15.21 trillion RMB, growing by 6.3% and accounting for 47.1% of China’s total trade. Trade with RCEP members grew by 4.5%, with ASEAN trade increasing by 9.4%. Meanwhile, trade with the EU and the U.S. grew by 0.9% and 4.2%, respectively.

Japan: Semiconductor Equipment Exports to China Surge by 61.6%

Data released by Japan’s Ministry of Finance shows that in August 2024, Japan’s semiconductor equipment exports to China surged by 61.6%, reaching 179.9 billion yen (around $1.29 billion).

The total weight of equipment exported from Japan to China in August was 6,742 tons, a 41% increase compared to the previous month. Machinery accounted for 23.2% of Japan’s total exports to China, with semiconductor equipment making up 11.9%.

These figures underscore Japan’s critical role in the global semiconductor supply chain.

Additionally, ASML, the Dutch photolithography giant, previously reported that its exports to China grew by 21% quarter-on-quarter in Q2 2024, reaching 2.3 billion euros. Earlier data showed that Asia accounted for 84% of ASML’s 2023 revenue.

(Photo credit: istock)

In recent years, the U.S., Japan and the Netherlands, have increasingly expanding restrictions on China in semiconductor technology. South Korea, on the other hand, has been cautiously responding to U.S. demands due to its significant dependence on the Chinese market.

Yet, according to a report by South Korean media outlet The Korea Herald, the U.S. is increasing pressure on South Korea to comply with its export controls to China.

At the Korea-U.S. Economic Security Conference 2024 held in Washington, D.C. on September 10th, U.S. Commerce Department Undersecretary Alan Estevez called on South Korea’s two leading HBM manufacturers, Samsung and SK hynix, to align with U.S. export controls on China. He urged that their production capacity be reserved for supplying advanced chips to allied nations, rather than competitors such as China.

Estevez emphasized his appreciation for South Korea’s long-standing cooperation with the U.S., but pointed out that since AI can be used for military purposes, it is crucial to prevent China from acquiring advanced chips to train AI models.

South Korea’s Trade Minister Cheong In-kyo responded that while they will discuss the matter with the U.S., export controls have a significant impact on South Korea’s businesses and economy.

Some industry sources cited by The Korea Herald have further pointed out that the direct export volume of chips from Samsung and SK hynix to China is not significant, so the actual impact may be limited.

However, per a previous Reuters report cited sources, it’s indicated that about 30% of Samsung’s HBM chip sales in the first half of this year were to China.

The Korea Institute for Industrial Economics and Trade noted that, unlike Japan and the Netherlands, South Korea cannot fully align with U.S. export control measures due to its significant reliance on exports to China.

Per the Chosun Daily citing data from South Korea’s Ministry of Trade, Industry, and Energy and the Korea International Trade Association, it’s shown that in July of this year, South Korea’s exports to China increased by 14.9% year-on-year to USD 11.4 billion, the highest since October 2022. Notably, memory exports surged 89% year-on-year to USD 6.8 billion.

Semiconductor exports saw particularly strong growth, with chip exports rising 49% year-on-year. In June this year, Korea’s memory exports also amounted to USD 8.8 billion, accounting for 65.8% of total semiconductor exports, which reportedly represents the highest proportion in two years since December 2021.

These figures reflect South Korea’s robust performance in the chip sector and the strong demand from the Chinese market for Korean semiconductors and other ICT products.

Meanwhile, due to the U.S.’s strict restrictions on chip manufacturing technology, China is striving for breakthroughs in the HBM field.

The HBM market is currently dominated by South Korea’s SK hynix, Samsung Electronics, and the U.S.’s Micron, all of which are producing the latest standard HBM3 chips.

However, a report from Tom’s Hardware, citing industry sources, has indicated that Chinese companies, including CXMT, have made progress in developing HBM and are in the early stages of production. Huawei is also collaborating with other Chinese companies, with plans to produce HBM2 chips by 2026.

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(Photo credit: Samsung)

To counter the U.S.’s ongoing semiconductor restrictions launched the U.S., China has outspent the U.S., South Korea, Japan, and Taiwan combined on chip manufacturing equipment in the first half of this year.

However, sources cited by a report from Commercial Times have warned that China’s excessive investment could soon lead to global overcapacity issues in traditional chip production, which is similar to the oversupply problems seen in the electric vehicle and solar energy sectors in recent years.

Per the data cited by CNBC from the Semiconductor Equipment and Materials International (SEMI), China spent USD 24.73 billion on chip manufacturing equipment in the first half of 2024, surpassing the combined USD 23.68 billion spent by the U.S., South Korea, Japan, and Taiwan during the same period. This surge in spending is driven by China’s efforts to achieve semiconductor self-sufficiency amid U.S.-China tensions.

The report further notes that since the U.S. implemented stricter export restrictions in October 2022, Chinese companies have been rapidly accelerating their procurement. SEMI data suggests that China’s total procurement this year is expected to exceed USD 35 billion.

Citing Clark Tseng, Senior Director at SEMI, the report indicated that the current equipment stockpiling trend may continue into the second half of this year and is expected to ease only by 2025 as companies work to absorb excess capacity.

Citing Alex Capri, a Senior Lecturer at the National University of Singapore and Research Fellow at the Hinrich Foundation, CNBC pointed out that Chinese companies are preemptively stockpiling chip manufacturing equipment in response to the risk of further export restrictions from Washington before the U.S. presidential election.

Capri highlighted that as China is making smooth progress in traditional chip production, the world might soon face an oversupply of traditional chips, similar to the overcapacity issues seen in electric vehicles and solar panels.

As a result, companies outside China could struggle to compete in the sector with lower-priced products from Chinese companies.

A previous report from Bloomberg pointed out that China has thus become the largest market by revenue for top global chip equipment suppliers. The latest quarterly financial reports from companies such as Applied Materials, Lam Research, and KLA show that China contributes approximately 40% of their revenue.

For Japanese company TEL and Dutch company ASML, the contribution from the Chinese market is even more significant, with nearly half of their revenue coming from China.

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• [News] China’s 1H24 Chip Equipment Purchases Exceed Taiwan, Korea, and US Combined, Reaching USD 25 Billion
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(Photo credit: SMIC)