The Semiconductor Industry’s
Future and Policy Challenges

Global Semiconductor Competition to Ride the Third Wave of Growth

To lead the third wave of semiconductor growth, such as in AI, governments around the world are launching semiconductor growth projects. The United States has enacted the CHIPS Act to increase the production capacity of leadingedge foundries, which are essential for the AI and IT industries, and aims to account for 24% of global foundry production by 2032. It has invested $52.7 billion in this initiative, with subsidies of $8.5 billion for Intel, $6.6 billion for Taiwan’s TSMC, and $6.4 billion for Samsung Electronics in South Korea to establish leadingedge foundry processes. Europe has also created the EU Semiconductor Support Act, which will invest about KRW 60 trillion over the next 10 years, attracting leadingedge foundry factories from companies such as Intel and GlobalFoundries, and providing subsidies of 30-40% of investment costs with the goal of raising Europe’s global semiconductor production share to 20% by 2030. Japan has declared the revival of its semiconductor industry and has provided KRW 10.7 trillion in subsidies to attract TSMC’s 1st and 2nd foundry factories. Additionally, Japan has established Rapidus as the first step to entering the leadingedge foundry industry, investing about KRW 50 trillion, and has invested approximately KRW 3.3 trillion in LSTC to apply Rapidus’ technology. Taiwan has recently enacted the Semiconductor Act, pledging to invest about KRW 12.3 trillion over the next 10 years to strengthen the competitiveness of leadingedge foundries such as TSMC. China is also pursuing advanced memory semiconductors and leadingedge foundry businesses, investing about KRW 180 trillion with government support. As such, countries like the United States, Taiwan, Europe, Japan, and China are engaged in fierce competition to lead the third wave of semiconductor growth. Korea also urgently needs government support equivalent to that of other nations to ride this wave. Moreover, to secure competitiveness in the global semiconductor industry, the government must provide absolute support through policy initiatives.

K-Semiconductor Special Act: Swift Implementation is Key

Unlike other countries, it is very difficult to build the infrastructure needed to establish semiconductor factories in South Korea. In the case of the Yongin cluster, the first factory is expected to begin operations by the end of 2027, after eight years of construction. In contrast, Taiwan, our competitor, has already established semiconductor industrial parks in advance with government support, and new factory construction takes only two years. For South Korea to remain competitive, it needs rapid infrastructure development, including electricity, water supply, wastewater treatment, roads, and renewable energy, along with swift approval processes and regulatory support for new factory construction. The semiconductor industry is driven by timing and cost competition. To capture the third wave of semiconductor growth, the United States is providing broad subsidies to enhance cost competitiveness. These subsidies cover not only semiconductor foundries and memory factories but also facilities for the production of semiconductor materials, parts, and equipment (MPE). South Korea also needs legislation to support subsidies for the construction of new production facilities and R&D investments in advanced memory semiconductors, vehicle semiconductors, nextgeneration power electronics semiconductors, and semiconductor MPE. Considering the rapid technological changes in semiconductor industries, the tax code must be promptly amended to extend tax credits for R&D and production facilities for large, medium, and small enterprises. That is, global semiconductor competitiveness can be secured only if supported by the swift implementation of the K-Semiconductor Act.

2028 Market Size Forecast

Private and Government Efforts Essential to Strengthen the Semiconductor MPE Ecosystem

The localization rate of semiconductor materials and equipment used by South Korean semiconductor manufacturers is below 30% and 10%, respectively. This means that semiconductor manufacturers are heavily reliant on unstable supply chains for MPE. Localization of these MPE is critical for improving cost competitiveness. Compared to US and Japanese MPE companies, South Korean companies lag behind in terms of revenue and profit. To improve the global competitiveness of domestic MPE companies, continuous efforts from both the government and private sector are required. The government should significantly increase R&D support for future semiconductor MPE technologies, while demand companies, such as semiconductor manufacturers, must open up and support the development of domestic semiconductor MPE companies. Specifically, a 12-inch waferbased semiconductor MPE test bed that provides infrastructure for technology development and evaluation should be established as soon as possible.

Establishment of a Semiconductor Research Institute is Not an Option, But a Must

Semiconductors account for more than 20% of South Korea’s total exports and over 10% of the country’s GDP. The semiconductor industry is highly competitive globally, with significant trade and societal issues. Therefore, it is necessary to have a governmentfunded research institute dedicated to studying future growth technologies, policies, trade issues, and societal concerns in the semiconductor industry. Currently, only two semiconductor specialists are working at KIET. To enhance South Korea’s global semiconductor competitiveness, a dedicated semiconductor research institute is absolutely necessary.

Long-Term Strategy Needed for Semiconductor Workforce Development

The global competition for semiconductor talent is intensifying, and various countries have introduced support policies. The United States is investing $10.5 billion from 2022 to 2026 to train semiconductor specialists through its Commerce R&D program. Taiwan is establishing research and development centers to train 10,000 new talents annually, investing KRW 66.5 billion to develop 400 doctorallevel specialists. China is establishing semiconductorrelated departments at universities to train 200,000 specialists annually by 2025. South Korea’s Samsung Electronics and SK Hynix have agreements with 11 universities, including KAIST, to train 510 semiconductor specialists each year, but there is still a shortage. Currently, around 3,600 graduates in semiconductorrelated fields are produced annually, but companies are struggling with a shortage of skilled workers. Samsung Electronics is hiring approximately 3,000, SK Hynix 1,700, and other semiconductor companies more than 7,000. Due to extremely low birth rates, the number of high school graduates is declining, and the preference for science and engineering as well as medical schools is making it harder to train the necessary workforce. Taiwan, in contrast, supplies a relatively large number of workers, and top talents prefer engineering schools and hope to join TSMC. To overcome this imbalance, longterm workforce development policies from the government and universities are essential. The Ministry of Education should support semiconductorspecialized universities, the Ministry of Trade, Industry and Energy should run semiconductorspecialized graduate schools, and the Ministry of Science and ICT should continue to expand AI specialized graduate schools. Additionally, since domestic universities cannot meet the demand, policies should be implemented to grant permanent residency to foreign graduate students who join South Korean semiconductor companies.