South Korea’s major industries have been impacted by China’s low-cost dumping, extending even to universal storage chips, which are a cornerstone of the country’s export industry that has long relied on the Chinese market. In order to support local chip companies, the South Korean government has introduced approximately $10 billion in financial aid.
According to reports from Taiwan’s DIGITIMES in November, the prices of Chinese storage chip manufacturers’ consumer-grade DDR4 products on the market are only about half that of Samsung Electronics, SK Hynix, and Micron Technology, the three global giants in the DRAM industry. In fact, they are even 5% cheaper than low-cost products available in the market.
It is expected that following Trump’s assumption of office, there will be stronger sanctions against China in the semiconductor field. Chinese storage chip manufacturers hope to expand their overseas market share through aggressive pricing strategies before the transition of power between the old and new U.S. governments. With government subsidies from the Chinese regime, these manufacturers are not only unafraid of losing money but are also significantly increasing the production of universal storage chips.
Reportedly, China’s largest DRAM manufacturer, Changxin Storage, is projected to reach a monthly DRAM production capacity of 200,000 units by the end of 2024, accounting for approximately 11% of global DRAM output. Despite its inferior product competitiveness compared to Samsung Electronics, SK Hynix, and Micron, and challenges regarding intellectual property, with support from the Chinese government, Changxin Storage aims to dominate the Chinese market in areas such as smartphones and PCs. This presents a significant blow to South Korea, which heavily relies on the Chinese market for chip exports, especially universal chips.
South Korea is a global leader in storage chips and has heavily relied on the Chinese market for a long time. Data from the Korea Trade Association reveals that the proportion of South Korean storage chips exported to China decreased from 51.4% in 2022 to 44.7% in 2023. However, in the first nine months of this year, the export percentage to China has further dropped to 37.9%, falling below the 40% mark for the first time in 12 years.
The low-cost universal storage chips from China have had a profound impact on the exports of Samsung Electronics, the leading semiconductor company in South Korea. Samsung Electronics, which accounts for about 18% of South Korea’s total exports, holds a pivotal position in the country’s economy; however, its performance is heavily reliant on the Chinese semiconductor market.
Furthermore, the ongoing global “semiconductor spring” driven by artificial intelligence has resulted in a decline in Samsung Electronics’ performance, a first during a period of market prosperity. Its semiconductor sector’s operating profit for the third quarter of this year dropped by 40% compared to the previous quarter, significantly below market expectations.
In contrast, SK Hynix benefited from having the world’s highest competitiveness in artificial intelligence storage chips, achieving its highest-ever performance in the third quarter. Nevertheless, its performance in universal storage products fell short of expectations.
Currently, both Samsung Electronics and SK Hynix are reducing the production of universal DRAM chips to focus on high-value-added products with advanced technology. SK Hynix announced at a recent meeting with global investment bank Goldman Sachs that it would decrease the production share of DDR4 DRAM and low-power (LP) DDR4 from 40% in the second quarter to 30% in the third quarter and further down to 20% in the fourth quarter.
During the earnings conference for the third quarter, Samsung Electronics also highlighted plans to reduce the production share of universal DRAM chips.
In a report issued in late November, the South Korean central bank warned that as the global semiconductor industry rapidly undergoes restructuring toward high-performance products like High Bandwidth Memory (HBM), South Korea’s semiconductor exports are expected to increase. However, the competitive pursuit from China poses a significant threat.
American economist Davy J. Wong recently told Epoch Times that South Korea’s current predicament in its major industries underscores how China’s current competitive model is a serious challenge to the existing economic, political, military, and technological norms globally. He suggests that the South Korean government may need to enhance technological research and development at a policy level to increase product value and expedite diversification in its market approach.
Indeed, the South Korean government has taken steps in this direction. To strengthen the semiconductor ecosystem and ensure global competitiveness, the government announced plans in late November to support the semiconductor ecosystem through providing over 140 trillion won (approximately $100 billion) in policy loans and funds to semiconductor-related companies involved in materials, components, equipment, and non-wafer factories (design-focused companies). This includes offering low-interest loans at the market’s lowest level through industrial banks.
Additionally, the government plans to significantly reduce the corporate burden on power transmission infrastructure costs for the Icheon and Pyeongtaek semiconductor complexes, in which SK Hynix and Samsung Electronics participate. These complexes are purported to be the world’s largest high-tech chip manufacturing clusters in Gyeonggi Province, South Korea. The government will also expand tax support for semiconductor companies’ research and development (R&D) and facility investments.
The heavy reliance on the Chinese market has led to a significant impact on most of South Korea’s major export industries. A report from the Korea Economic Research Institute in June of this year indicates that among the products for which China is dramatically increasing production, many are key product categories exported by South Korea. Ten out of the top 15 exported products of South Korea and China collide in the market competition.
According to the report, using the average export price from January to March of this year as a benchmark, in major competitive product categories such as semiconductors, automobiles, batteries, shipbuilding, and steel, China’s export prices are only 30% to 70% of South Korean products. China’s aggressive low-price export strategy inevit…