Taiwan Reacts to Korea's Chip Push: "They Copied Us, But TSMC Won't Be Shaken"

As Korea unveiled a large-scale semiconductor and AI investment plan, Taiwan, the world's largest foundry powerhouse, responded immediately. While saying that "competition will grow even fiercer," it also expressed confidence that "the TSMC-centered ecosystem will not be easily shaken."

"Competition Will Grow Fiercer"... Taiwan Also Expected to Accelerate R&D

According to local media including Taiwan's United Daily News and China Times on the 30th of last month, a researcher at the Taiwan Institute of Economic Research (TIER), Liu Pei-chen, analyzed that Korea's announcement of its "three mega projects" would serve as a catalyst intensifying the semiconductor competition between Korea and Taiwan.

She assessed that "Korea's massive investment will be a catalyst prompting Taiwan to accelerate its advanced process research and development (R&D) even further," while adding that "since Taiwan has already established itself as a global semiconductor hub, it will not be easy to replace that position in a short period."

Taiwan's industry noted that "Korea aims to roughly double its DRAM production capacity within the next five years," interpreting the project as a strategy to significantly expand memory production capacity centered on Samsung Electronics and SK hynix.

However, the Economic Daily News predicted that the short-term market impact would be limited, as considerable time is needed before new production facilities are actually reflected in the market.

"A Leap If Successful, a 'Capex' Trap If It Fails"

In particular, the analysis noted that since a small number of large companies such as Samsung Electronics and SK hynix account for a large share of the Korean economy, if the semiconductor business environment falters, the shock is more likely than in Taiwan to spread beyond the companies to the national economy as a whole.

Taiwanese experts assessed Korea's investment strategy as an attempt to preempt global AI demand, while also pointing out long-term investment risks.

Lin Wei-tze, deputy director of the Topology Research Institute and a former vice president in charge of strategy at Foxconn, analyzed that "Korea's strategy is aimed at preempting demand in the AI industry, and it benchmarks the science park model that grew Taiwan's semiconductor industry."

At the same time, he expressed concern that "if the AI investment boom slows around 2032, Korea faces the possibility that demand could decline before depreciation from its large-scale plant and equipment investments is completed."

He said, "Korea's domestic market is not large, making it difficult to absorb a decline in demand on its own," adding that "there is also a risk of falling into a 'Capital Expenditure Trap' — a trap of excessive facility investment — in which the enormous fixed-cost burden worsens corporate earnings."

Experts also stressed that a semiconductor cluster is not an industry that can be built in a short period.

Deputy Director Lin said, "China has also continued massive investment for more than 10 years, but it has yet to catch up with Taiwan's competitiveness," adding that "a semiconductor ecosystem is completed only after being accumulated over a long time."

"Honam Investment Is Also a Cost-Cutting Strategy"... Profitability Remains a Variable

In Taiwan, the reason Korea seeks to build a large-scale semiconductor production base in the Honam region was also interpreted as a cost-cutting strategy.

The analysis holds that, since the semiconductor industry is a representative capital-intensive industry requiring enormous capital, Korea is trying to establish a new production hub to reduce the burden of land, water, and electricity costs in the greater Seoul area.