Supply Chain Matters highlights yet another indication that that governments and respective large semiconductor producers are initiating strategic moves to position global regionalization centric concentration for semiconductor fab and advanced high tech capability.

 

Background

In prior semiconductor supply network focused commentaries this blog has highlighted that as geo-political and global trade tensions abound influential governments have moved to forms of industrial policy that clearly focus semiconductor design, fabrication, and assembly as a key aspect of domestic supply network presence. These moves are indeed reinforcement that semiconductors are the new oil that drive economic growth and domestic security.

The enactment of the U.S. CHIPS Act was a significant milestone in this effort and the result has been many large semiconductor producers such as Samsung, Intel and others announcing new investments in U.S. based capabilities.

 

Latest Iteration

Last week the Government of South Korea announced plans to foster the globe’s largest concentration of semiconductor supply network capabilities over the coming two decades. The move is reportedly an effort to protect the country’s standing as a leader in advanced semiconductor development and production. It is coupled with a reported broader $418 billion of planned private industry investment within strategic high tech supply network investments focused on semiconductor, advanced battery, and electronic display advanced capability areas,

Reportedly a new industrial complex is being envisioned extending out to the year 2042 to be located in the Gyeonggi province area near the city of Seoul. The equivalent of $228 billion of investment is reportedly planned with producers such as Samsung Electronics indicating a desire to invest in five new facilities to support contract chip fabrication, memory chain production and other needs. According to South Korea’s Ministry of Trade, the presence of Samsung and memory chip producer SK Hynix will the basis of the globe’s largest single site semiconductor complex.

According to reporting by The Wall Street Journal (Paid subscription required),  the government will not be directly funding the investments but rather providing an attractive complement of tax incentives, more business-friendly regulatory measures, subsidized research and development activities. In research and development, a declared goal for fostering 10 leading chip-design firms has been established.

Other incentives are reportedly government subsidized added water and utility investments critical to such areas of production.

 

Added Thoughts

Both South Korea and Japan are being positioned by evolving U.S, trade policy to be noted as friendly nation trade partners. Japan itself is increasing its own investments in lower-tiered semiconductor materials supply capabilities along with fab capabilities.

The European Union is reportedly considering a proposed European CHIPS Act providing upwards of €43 billion in public and private investments in domestic advanced semiconductor supply networks. The government of India has announced an initiative as well.

If all of these plans come to fruition the global landscape would include a variety of regionally based semiconductor or battery focused hubs to support both global along with domestic and regional needs. The obvious concern is that of global overcapacity but as those in high tech industry supply chain ecosystems are acutely aware, this has been a perennial challenge with cycles of excess demand or supply. The challenge is that such expensive investments imply a need to always be recognized as having leading-edge capability with solid base of demand for either commodity or advanced design chips.

The stakes are getting higher.

 

 

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