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South Korea Commits $450 Billion for Semiconductors

South Korea Commits $450 Billion for Semiconductor Manufacturing

Semiconductor manufacturing is very important. Consumers trying to buy GPUs and CPUs in 2021 can attest to the frustrations of not having enough. South Korea is the biggest producer by region of memory semiconductors globally. Whereas Taiwan dominates the logic side, SK Hynix and other brands produce the bulk of the world’s RAM and onboard memory modules. And according to a new Bloomberg report, the country is eyeing a major investment into that technology.

“Our government will unite with companies to form a semiconductor powerhouse,” said President Moon Jae-in of South Korea. “We will support companies concretely.” In the future, manufacturers will also be able to deduct more of their R&D expenses from their taxes, freeing up additional funds for investment.

This investment comes as a total of more than 150 companies working with the Korean government will receive supplemental funding. Many of the biggest names in the semiconductor industry have announced massive increases in spending to build infrastructure. Samsung recently committed to a 38 trillion won, or $33.7 billion, investment through 2030 to build more capacity. The funding will afford Samsung a new semiconductor fab in Pyeongtaek with 2.1 million square feet of research and manufacturing space.

That new factory space will focus on innovations and production of 14nm DRAM and 5nm logic with EUV to meet demand in both markets. All this is in addition to another planned funding plug of $117 billion.

The US government has announced a similar, although smaller, deal. The Biden administration recently announced a $50 billion investment via the CHIPS Act. This could provide companies like TSMC increased funding to set up research and manufacturing in the states to better meet demand.

What about the future?

It’s important to note that this decade-long plan will do nothing to meet the problems with semiconductor manufacturing in 2021. It takes years to bring new capacity online. And as droughts become more commonplace, we can expect this issue to reoccur if climate change is not addressed to meet increasing water demands. Because as water becomes more of a premium, chipmakers will once again have to find new sources, or shut down production.

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According to reports from the Korean trade ministry, the country is responsible for more than 35% of global memory modules. By comparison to Taiwan, the leader in logic chips, which produce just over 13% of memory. It’s very interesting to think about. And it obviously reveals why the current shortage is so pronounced. Droughts in Taiwan have had a major impact on the capacity for logic chips. It also shows no signs of getting better.

Memory and Logic semiconductor manufacturing by country

SK Hynix itself has also committed to major investment in new plants across South Korea. The company has committed to new semiconductor fabs in Yongin at an estimated cost of $106 billion. And now the outfit has announced a further l $97 billion for other improvements. That latter amount will go to improve existing capacity at plants.

Semiconductor research and manufacturing will only become more important as time goes on. Not only for consumer demand, but for military efforts. Advanced weapons systems require more technology, and that means more chips. The famously pricey F-35 is a prime example of military development consuming tons of material. The US has spent more than $1.5 trillion trying to develop the future fighter. It was meant to replace the F-22 and other aging planes. Recent failures have led the US government to scale back plans.

That jet tries to do everything and ends up costing $36,000 an hour to fly. The US government has decided to focus on improving older planes as a result of that ballooned cost. The U.S. plans to buy more than 2,000 F-35s through 2044 to replace existing assets. As a result, there will be plenty of demand for advanced electronics.

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