Hello, this is a blogger who reads tech trends. Today, I'd like to analyze the immense winds of change sweeping through the 'semiconductor' market, specifically 'memory semiconductors,' one of the hottest topics in the global technology industry. We need to pay particular attention to China's recent aggressive moves, which are shaking up the global semiconductor landscape.
As China launches an all-out offensive in the memory semiconductor market, which was previously dominated by Korean and American companies, we are witnessing the dawn of a new era that goes beyond simple competition. Through this article, we will deeply examine the current status and strategies of China's memory semiconductor industry, and how these changes will impact our economy and technology sector. I hope you gain insights to easily and clearly understand the complex flow of the semiconductor market and predict the future.
National digital infrastructure and microchips symbolizing technological sovereignty and self-sufficiency
Why China's Memory Semiconductors, and Why Now? - Strategic Background and Goals
Visualization showing dynamic competition and growth in the DRAM and NAND flash markets
In recent years, China's memory semiconductor industry has grown remarkably, posing a strong challenge to the global market. Behind these aggressive moves lie vast national strategic goals that extend beyond mere economic interests.
Securing Technological Sovereignty Beyond Self-Sufficiency
China has long been highly dependent on semiconductor imports, and this vulnerability became even more pronounced with the intensification of the US-China tech hegemony competition. Specifically, technology blockade measures, such as the US sanctions on Huawei, provided China with a strong motivation to strengthen its domestic semiconductor production capabilities and secure technological sovereignty. This is perceived not merely as an issue of economic independence but one directly linked to national security, demonstrating a strong will to build a 'self-sufficient' system that remains unshaken by any external pressure.
Example: China, whose semiconductor self-sufficiency rate once hovered around 10%, set a 'semiconductor rise' goal to increase it to 70% by 2025. This demonstrates a strong commitment to fostering domestic semiconductor companies and internalizing core technologies through massive government-led investment and policy support. US export controls on high-performance semiconductors and equipment have further accelerated China's efforts toward self-sufficiency.
Aggressive Investment to Reshape the Global Market
As a latecomer, China is pouring vast capital and human resources into reshaping the global memory semiconductor market. Through the National Integrated Circuit Industry Investment Fund, also known as the 'Big Fund,' tens of trillions of won are being provided to semiconductor companies to expand production facilities, conduct R&D, and attract talent. This aggressive investment focuses on long-term market share acquisition and technological advancement rather than short-term profitability.
Example: China's leading NAND flash manufacturer, Yangtze Memory Technologies Co. (YMTC), and DRAM manufacturer, ChangXin Memory Technologies (CXMT), are rapidly enhancing their technological capabilities with full government support. YMTC, in particular, developed 232-layer NAND flash in 2022, fiercely pursuing leading companies like Samsung Electronics and SK Hynix. These Chinese companies sometimes employ a strategy of supplying products at lower prices than competitors to penetrate the market in its early stages.
China's All-Out Offensive: What Are the Specific Moves? - Technology Development and Market Penetration
China's memory semiconductor offensive is not just a matter of will; it is expanding across the board, from general-purpose products like DRAM and NAND flash to High Bandwidth Memory (HBM), which is crucial for the age of Artificial Intelligence (AI).
Shaking the Commodity Memory Market: DRAM and NAND Flash
Amidst the recent memory semiconductor shortage and soaring prices for DRAM and NAND flash, Chinese companies are seizing this market situation as an opportunity to aggressively expand production and penetrate the market. For commodity DRAM and NAND flash, securing cost competitiveness through mass production is crucial, and China is rapidly catching up in this area with government backing.
Example: According to Taiwanese media Digitimes, Chinese companies are increasing production in response to rising memory semiconductor prices, particularly expanding their influence in the commodity DRAM and NAND flash markets. They are adopting a strategy of increasing market share by boosting production capacity primarily in legacy (older) processes, where yield rates are relatively easier to secure, rather than advanced processes. This can be interpreted as a move to exploit potential shortages of commodity products that may arise as Korean companies transition to higher-value-added products.
Tip: To outpace China's pursuit, South Korea's Samsung Electronics and SK Hynix are shifting their portfolios towards high-performance, high-capacity products that demand greater technical difficulty and offer better profitability, rather than commodity products. This strategy aims to lead the market through a technological 'super-gap' rather than price competition.
Ambition to Target Even the HBM Market: High Bandwidth Memory Challenge
With the advancement of Artificial Intelligence (AI) technology and the surge in demand for High-Performance Computing (HPC), High Bandwidth Memory (HBM) has emerged as a core component in the semiconductor market. HBM is a product that innovatively boosts data processing speed by vertically stacking multiple DRAM chips, a market currently almost monopolized by Samsung Electronics and SK Hynix. However, China is now eyeing even this Korean 'stronghold' of the HBM market, accelerating related investments.
Example: While Chinese memory companies have not yet reached the mass production stage for HBM, they are investing heavily in HBM-related research and development and actively working to secure necessary equipment and personnel. Although HBM technology requires high-level packaging techniques and yield management, making entry barriers high, China demonstrates a strong will to internalize HBM technology, a core component for the AI era, from a long-term perspective.
Tip: HBM technology demands complex technical capabilities beyond simple DRAM manufacturing. Essential know-how includes advanced packaging technologies like Through Silicon Via (TSV), as well as thermal management and power efficiency across various fields. For China to successfully enter the HBM market, acquiring these complex technical capabilities in a short period will be its biggest challenge.
Impact on the Korean Semiconductor Industry and Response Strategies - Risks and Opportunities
China's all-out offensive in memory semiconductors clearly poses a threat to the Korean semiconductor industry, but it can also create new opportunities. The crucial aspect is to accurately read these changing trends and respond proactively.
Intensified Competition in the Commodity Market and Concerns over Profitability Decline
As Chinese companies fully enter the commodity DRAM and NAND flash markets, Korean companies may face the challenge of intensified price competition and declining profitability. China's low-price offensive could lead to market oversupply, which in turn would cause product prices to fall, negatively impacting the revenue and profits of Korean companies. There are concerns that the difficulties Korean companies experienced in the past due to China's pursuit in the LCD industry could be replicated in the memory semiconductor market.
Example: From the late 2000s to the early 2010s, Chinese display companies, backed by massive government support, entered the LCD panel market and flooded it with low-priced volumes. Consequently, Korean companies had to restructure their businesses, either withdrawing from or scaling down their LCD operations. If a similar situation occurs in the memory semiconductor market, Korean companies will need to reduce their reliance on commodity products and further accelerate their transition to high-value-added products.
Tip: Korean companies must continue efforts to reduce costs and improve process efficiency for commodity products, while also competing with differentiated technology and quality that China cannot easily match. Furthermore, a strategy of diversifying customer portfolios is necessary to reduce dependence on specific markets.
Technological Innovation and Portfolio Diversification for Maintaining Super-Gap
To outpace China's pursuit and maintain global leadership, it is paramount to sustain an overwhelming technological 'super-gap.' This particularly requires proactive research and development and securing mass production capabilities in next-generation high-value-added memory technologies such as HBM and PIM (Processing-in-Memory). Additionally, a strategy of diversifying business portfolios beyond just memory semiconductors to non-memory areas like foundry (semiconductor contract manufacturing) and system semiconductors is essential to secure future growth engines.
Example: Samsung Electronics and SK Hynix are focusing on developing and mass-producing the latest HBM technologies, such as HBM3E, to strengthen their position in the AI semiconductor market. Furthermore, Samsung Electronics is making large-scale investments in its foundry business, striving to secure global competitiveness in the system semiconductor sector. These efforts are key strategies to gain an advantage over China and lead the future semiconductor market.
Tip: Close cooperation between the government and businesses is essential for maintaining a technological super-gap. Continuous efforts are needed for R&D support, expansion of talent development programs, and localization of advanced equipment and materials to strengthen the overall competitiveness of the semiconductor industry ecosystem. Diplomatic efforts to lead international technical standards and reinforce Korea's critical role within the global supply chain are also important.
Conclusion
China's all-out offensive in memory semiconductors is creating a new competitive landscape in the global semiconductor market, posing significant challenges to the Korean semiconductor industry. China is making massive investments to secure technological sovereignty beyond self-sufficiency and reshape the global market, eyeing not only commodity memory but also the High Bandwidth Memory (HBM) market. This shift represents both a threat and a crucial opportunity for Korean companies to maintain their technological 'super-gap' and diversify their business portfolios to achieve further growth.
Ultimately, continuous technological innovation and bold investment are essential to secure leadership in the future semiconductor market. The government and businesses must work closely together to cultivate talent, achieve localization of core technologies, and strengthen Korea's unique position within the global supply chain. We anticipate that the Korean semiconductor industry will continue to grow robustly through unwavering strategies and execution amidst the waves of change. I hope the content discussed today has helped our readers understand the rapidly changing semiconductor market.
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