It is pointed out that not only Samsung Electronics and SK Hynix, but also domestic semiconductor equipment makers could be hit as sanctions against the Chinese semiconductor industry are strengthened due to intensifying competition between the US and China for technological supremacy.
According to the industry on the 4th, KB Financial Group’s management research institute recently reported the concerns of domestic equipment makers through a report on ‘analysis of the impact of changes in the semiconductor market environment on the domestic semiconductor equipment industry’.
Semiconductor equipment is an essential element for advanced semiconductor manufacturing, and recently, competition for advanced equipment from key semiconductor manufacturing companies such as Samsung Electronics, SK Hynix, TSMC, and Intel is intensifying. In this situation, the Chinese semiconductor industry is having more difficulty securing advanced technology due to the US government’s all-round pressure.
Semiconductor manufacturing equipment is divided into front-end equipment that processes wafers to make devices, and back-end equipment that assembles and performs performance tests on these devices. Front-end equipment requires high technology and affects the performance of semiconductors, so equipment costs are high, while back-end equipment has relatively low entry barriers and price competitiveness is key.
The main suppliers of the Korean semiconductor equipment industry are divided into ▲ domestic fabs (factories) of domestic semiconductor manufacturers ▲ overseas fabs of domestic semiconductor manufacturers and ▲ overseas fabs of foreign semiconductor manufacturers. As a result, it is affected by the facility investment movement of domestic fabs, the investment trend surrounding overseas semiconductor companies and fabs, and changes in international policies.
In fact, exports account for 40-50% of the sales of the domestic semiconductor equipment industry over the past three years, greatly affecting performance.
Semiconductor equipment imports from China, the largest export region for Korean semiconductor equipment, showed an average annual growth rate of 29.6% between 2017 and 2021, and in 2021, equipment imports reached an all-time high of $38.6 billion. However, growth plummeted to -1.6% in the first half of 2022.
On the other hand, the US (40.4%), the EU (75.4%), and Japan (28.1%) saw a double-digit increase in equipment import growth in 2022, a move in contrast to China.
Analysts say that the decline in China’s semiconductor equipment imports is related to China’s sluggish economy and the semiconductor supplier consultative body ‘Chip 4′ and the United States’ measures to restrict exports of semiconductor equipment to China. The U.S. effectively banned the export of semiconductor equipment to Chinese companies that produce DRAMs below 18 nm (nanometers), NAND flashes with 128 layers or more, and logic chips below 14 nm.
◆Slowdown in Chinese factory operation and construction… Equipment Localization Rate Growth Threat Factor
Along with this, the report revealed that as the introduction of core equipment becomes difficult due to US equipment export regulations, difficulties in fab operation and a decrease in new fab construction are appearing. As a result, there is a high possibility that demand for Korean equipment will decrease due to increased uncertainty in Korean fabs in China.
In fact, exports of semiconductor equipment to China last year have not recovered to the pre-corona level, such as shrinking below the level of 2019-2020 before and after the corona outbreak.
In particular, SMIC, China’s representative foundry company, and memory manufacturers’ facility investment decreased by more than 60% this year, and demand for local fabs in China from Samsung Electronics and SK Hynix, which are major export targets of domestic equipment makers, is highly likely to decrease.
“As a result, it is highly likely that the ripple effect of the US export restrictions will act as a short- to mid-term factor that accelerates the decline in exports of Korean equipment to China,” the researchers said.
In addition, it is pointed out that the localization rate of semiconductor equipment in China is increasing due to the growth of Chinese equipment companies, which can pose a threat to Korean equipment companies in the long term.
It is reported that China has promoted localization of semiconductor equipment in response to US semiconductor regulations, and the proportion of Chinese companies purchasing Chinese equipment increased from 21% in 2021 to 32% in the first half of 2022.
Currently, China has not secured advanced equipment technology for 14nm or less equipment, so it mainly produces non-advanced mature process equipment. Most likely.
However, the active semiconductor support policies of major countries and the construction of new fabs outside of China can present an opportunity for equipment suppliers to discover new markets in the long term.
Research Fellow Shim Gyeong-seok said, “Some areas, such as domestic and overseas foundry fab expansion and new construction, and investment expansion by silicon wafer manufacturers, are positive for the equipment industry due to the investment trend.” It can also be an opportunity for domestic companies that have a market share in the process equipment field,” he said.
Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.