As artificial intelligence (AI) advances and drives a surge in semiconductor demand, the global chip industry is enjoying a boom. With AI being applied across all industries, demand for high-bandwidth memory (HBM) as well as server DRAM is expected to grow steadily, raising expectations that the streak of surprise earnings at Korean chipmakers will continue for some time. However, since semiconductors are a classic cyclical industry, there are considerable concerns that failing to prepare for the next generation amid the boom could lead to a crisis. Above all, with China's semiconductor rise (technological leap) proving highly threatening amid the U.S.-China hegemony war, fears are deepening that if Korean companies delay preparing for the future and the government delays stronger incentives, Korea could be overtaken by China rather than pulling ahead.
In an interview with The Seoul Economic Daily on the 27th, Kwon Seok-joon, a professor of chemical engineering and semiconductor convergence engineering at Sungkyunkwan University, said, "China's leap, which is producing results in its semiconductor rise at a frightening pace, has reached a level that threatens Korean chipmakers." He added, "Without bold and structural incentives for advanced industries such as semiconductors, like those in China, the future competitiveness of our semiconductor industry could fall to an irreversible level." Kwon said, "We must have a sense of crisis that if we grow complacent in the chip boom, we could be reduced to subcontractors for AI chip companies like Nvidia."
-How long do you expect the memory supercycle driving the semiconductor boom to last?
△In the past, ups and downs followed market conditions such as memory chicken games and volume competition among chip companies. Now, prediction is not easy because geopolitical uncertainty factors are overlapping, such as the Iran war and changes in raw material supply chains due to the blockade of the Strait of Hormuz. However, considering that memory chipmakers have secured long-term orders of more than a year from customers in this supercycle, I expect the boom cycle to be sustained for about two more years.
-Couldn't customers cancel contracted volumes if chip demand falls?
△In the past, when market conditions worsened, it was not uncommon for customers to cancel orders. Now, with strong HBM demand, Korean chipmakers are signing contracts that require customers to pay corresponding costs if they cancel orders. To avoid long-term risks, they also sign contracts with customers on a joint investment basis. For example, when making factory expansion investments, contracts are sometimes carried out in the form of joint ventures in which customers participate with substantial stakes. It is a structure in which customers that participate in the investment have no choice but to take on the ordered volumes to the end. From the perspective of Korean companies, this allows them to avoid risks from overproduction and sunk costs.
-Does this mean risk factors in the chip market are not significant for the time being?
△Looking at China's current semiconductor technology level and the government's efforts for a semiconductor rise, Korean companies are absolutely not in a position to be complacent. The most noteworthy development is China's efforts to break free from the risks of so-called "chokehold" (卡脖子, chabozi) core technology regulations imposed by the United States. The Chinese government and semiconductor industry are systematically supporting a list of technologies to overcome and escape U.S. sanctions. A decade ago, only four to five of about 30 target technologies had been achieved, but now it is easier to find technologies that have not been achieved.
-Has China escaped the U.S. chokehold sanctions?
△At a recent conference held in China, Huawei unveiled its new AI accelerator "Atlas 350" and declared that it had "fundamentally escaped U.S. regulatory risks." It is an expression of confidence that China has succeeded in a 100% Chinese-made AI accelerator using independently developed parts without relying on overseas supply chains from the United States, Korea, and Taiwan. However, China has not completely escaped the U.S. chokehold. The finishing touch to escaping U.S. chokehold regulations is making Chinese equipment that can replace the extreme ultraviolet (EUV) lithography equipment owned by Dutch semiconductor equipment maker ASML. Currently, China is judged to need more than 10 years to localize EUV lithography equipment technology.
-Does this mean it will take China more than 10 years to narrow the gap with global chipmakers?
△What is noteworthy here is that China is accelerating the development of semiconductor manufacturing equipment that can substitute for EUV lithography equipment. A representative example is deep ultraviolet (DUV) lithography equipment, the generation before EUV. At recent semiconductor events in China, you can see that DUV lithography equipment produced with its own technology is being used in chip manufacturing sites. China is building up advanced semiconductor technology one by one, localizing the main light sources of lithography equipment and developing specific materials that detect this light. At this pace, the possibility cannot be ruled out that a Chinese company will emerge within 10 years to make equipment that can replace ASML's EUV lithography equipment.
-Isn't the U.S. effort to contain China coming to nothing?
△Looking at recent U.S. pressure on China, we can see that it is expanding not only to semiconductors but also to the AI field. One of the Trump administration's second-term core policies is an AI strategy. Last year, President Trump announced a new AI project called the Genesis Mission by executive order. The goal is to place AI at the center of the hegemony war with China and apply it to industry and security to achieve innovation.
-Korea is suffering from a shortage of semiconductor talent, while China is in stark contrast.
△In Korea, most of the core talent that led the country's rise as a semiconductor powerhouse belongs to the generation that entered college between 1970 and 1990. Most of them will retire before long, and if this gap is not filled, upgrading advanced semiconductor technology could become difficult. In contrast, young talent in China is flocking to semiconductors, becoming the main force accelerating the semiconductor rise. At one engineering college in Wuhan, the number of professors in semiconductor-related majors reaches 160, and there are nearly 2,000 graduate students. Without structural incentives for advanced industries such as semiconductors that are stronger and more certain than China's, Korea being overtaken by China in future competitiveness could be only a matter of time.
-With Google unveiling "TurboQuant," which compresses AI memory usage, concerns are being raised about slowing memory demand.
△TurboQuant is focused more on improving processing speed than on saving memory. On the contrary, we should pay attention to the fact that TurboQuant technology could stimulate chip market growth by expanding AI utilization. As in "Jevons' paradox," where improved energy efficiency actually increases demand and raises total energy use, improved performance could in fact expand the entire memory ecosystem.
-Won't demand for customized memory grow as AI use becomes more active?
△HBM will be the mainstream in the chip market for the time being, but afterward, a new concept of memory device called ICMS (Inference Context Memory Storage), which strengthens the context of the inference process, could attract attention. In an AI industry structure where inference is the mainstream, Nvidia will demand memory embedded with ICMS as a customized computing device. If Samsung Electronics and SK hynix fail to meet such demands, Nvidia will step forward to design memory chips on its own. At that moment, Samsung Electronics or hynix could face a crisis of being reduced to memory subcontractors that only supply memory cells.
-Does this mean the current chip boom could be the starting point of a crisis?
△If we remain complacent like this, we must have a sense of crisis that Korea's semiconductor industry could collapse in the post-HBM era. Big tech firms including Nvidia and Google are designing their own AI accelerators and will request customized HBM for performance optimization, demanding that chipmakers overhaul their structures. Eventually, the HBM industry will take on a structure similar to foundry, which is order-based contract manufacturing. Samsung Electronics, which has a foundry business, can maintain competitiveness, but it will be an enormous challenge for SK hynix.
