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Recently, the signing ceremony of the China-Korea Semiconductor Fund project was held in Wuxi. The China-Korea Semiconductor Fund, with a total scale of 1 billion yuan, was jointly funded by Wuxi High-tech Zone, Industrial Group and Junhai Tin Industry.

Among them, "Junhai Tin Industry" is controlled by Wuxi Junhai Lianxin Investment Management Co., Ltd., which is jointly held by Junlian Capital and SK China through Junhai Chuangxin (Beijing) Consulting Management Co., Ltd., with each party holding 50% of the shares. According to public information, Junhai Chuangxin is an institution focusing on investment in semiconductors and upstream and downstream fields. It has previously invested in companies such as Black Sesame Intelligent Technology, Mouxin Technology, Shengmei Shanghai, and SmartSens Technology.

This timeMultiple parties join forces to guide leading companies in the Korean semiconductor industry chain to implement industrial projects in WuxiAnd through fund investment, it helps Korean companies achieve industrialization and capitalization development in Wuxi.

South Korean semiconductor companies are flocking to

At present, the Nextin and Gigalane projects have been successfully settled in Wuxi High-tech Zone. Both are semiconductor equipment companies.

In August 2023, Nextin settled in Wuxi with a total investment of US$200 million. It focuses on the research and development of high-end testing and measurement equipment for semiconductor wafers and semiconductor silicon wafers. Its products are mainly used for the testing of internal flash memory and logic chips. It is a supplier to storage companies and foundries.

Gigalane mainly produces semiconductor etchers, LED component etchers, nanoimprint lithography equipment, etc. Among them, the shipment volume of LED etching equipment ranks first in the global market. According to reports, the Gigalane project was signed and landed in Wuxi in July this year, and will build an etching equipment assembly production line and equipment product verification line, and also plans to introduce nanoimprint lithography equipment production.

In addition to the two major projects, Nextin and Gigalane, several Korean-funded semiconductor projects have been implemented in Wuxi over the past period of time.

The headquarters and semiconductor equipment project of South Korea's Tesikr Corporation have also chosen to be located in Jiangyin City, Wuxi, with a total investment of US$200 million. After the project reaches full production, the annual sales are expected to reach RMB 350 million. The second phase of the project plans to build the China-Korea Core Valley Industrial Park, which will invest in the construction of a wide bandgap automotive-grade power semiconductor module packaging and wafer concept factory.

Looking back at the layout of Korean semiconductor companies in Wuxi, it has a history of more than 20 years.

As early as August 2004, South Korea's Hynix Semiconductor and Europe's STMicroelectronics jointly invested US$2 billion in the Wuxi VLSI project, which became the largest foreign-invested project in Jiangsu Province at the time. After 20 years of development in Wuxi, SK Hynix Semiconductor has become the largest foreign-invested project in Jiangsu Province and the largest project invested by SK Group in China.

Currently, SK Hynix relies on China as a major market and key manufacturing center for its memory chips, with factories in Wuxi, Chongqing and Dalian.

It is not difficult to see from this series of initiatives and layouts that the Korean semiconductor industry pays attention to and attaches importance to the Chinese market.

SK Group is pouring money into a new fund aimed at helping South Korean chip companies industrialize and capitalize in China, even as the United States steps up pressure on its allies to curb China's tech ambitions.

It can be understood as: Korean chips need China.

This is not groundless. We can analyze it from many aspects and angles.

South Korea's semiconductors are exported to China like crazy

First, let’s look at South Korea’s semiconductor export data.

According to data from the Ministry of Trade, Industry and Energy and the Korea Trade Association, South Korea's exports to mainland China increased by 14.9% year-on-year to US$11.4 billion in July 2024, the highest since October 2022.

Among them, the export growth of semiconductor products was particularly prominent. Chip exports increased by 49% year-on-year, and memory chip exports increased by 89% year-on-year to US$6.8 billion. These data reflect South Korea's strong performance in the semiconductor field and the growing demand for Korean chips and other ICT products in the Chinese mainland market.

From January to July this year, South Korea's exports to mainland China totaled US$74.8 billion, exceeding its exports to the United States (US$74.5 billion).Mainland China once again became South Korea's largest export destination.

This data reflects China's important position in the global semiconductor supply chain and the strong growth momentum of South Korea's semiconductor industry in the Chinese market. As the semiconductor industry continues to improve, South Korea's exports to mainland China are expected to maintain growth momentum.

According to the latest data from the Korean Customs, in the first 20 days of August, South Korea's semiconductor shipments increased by 42.5% year-on-year, accounting for 20.3% of South Korea's total exports.

In addition, South Korea's semiconductor equipment exports to China have been growing, with export data at the beginning of the year exceeding the level when the semiconductor industry was booming two years ago. According to statistics from the General Administration of Customs of China, China imported US$149.69 million in semiconductor equipment from South Korea in January this year and US$148.99 million in February. This is higher than the same period in January-February 2022 when the semiconductor industry was booming, with year-on-year growth of 7.8% and 20.2% respectively.

Some analysts said,China's traditional semiconductor industryRecentexpansionThis is a favorable factor for Korean equipment companies. Although the competitiveness of the Korean industry lags significantly compared with leading semiconductor equipment powers such as the United States, Japan and the Netherlands, as the competitive landscape expands to include conventional equipment,South Korean device makers have found clearer opportunities.

South Korean chip giant doubles its revenue in China

In addition, the importance of the Chinese market to the Korean semiconductor industry can also be seen from the layout and performance trends of Korean chip giants Samsung and SK Hynix in China.

Samsung and SK Hynix, the world's largest and second largest memory chip manufacturers, have invested billions of dollars in chip production facilities in China. It is reported that about 40% of Samsung Electronics' NAND flash memory chips are produced in the Xi'an factory; about 40% of SK Hynix's DRAM chips are produced in Wuxi, and 20% of its NAND flash memory chips are produced in Dalian. In addition, SK Hynix also operates a packaging plant in Chongqing, and Samsung has built a semiconductor back-end packaging and testing plant in Suzhou.

The explosive growth of HBM due to the expansion of the AI ​​market has triggered a change in the DRAM market model. In addition, the increase in demand for replacement of servers and corporate computers, coupled with the launch of AI-equipped PCs and AI mobile phones, has fully demonstrated the good news of sales growth.

According to Samsung's first-half financial report released last week, the company's revenue from China in the first half of this year increased by 82% year-on-year to 32.35 trillion won. The Chinese market accounted for about 31% of Samsung's regional revenue, which was 104.9 trillion won, an increase of 28% over the same period last year.

SK Hynix also reported a surge in sales in China, with revenue from Chinese customers rising 122% to 8.6 trillion won, accounting for 30% of its total revenue of 28.8 trillion won in the first half of the year. SK Hynix is ​​a major supplier of advanced memory chips (HBM), according to the company's financial report filed last week.

More than 95% of SK Hynix's revenue comes from memory chips. In addition to chips, Samsung's products sold to China also include smartphones and home appliances.

Whether it is from South Korea's semiconductor export data or the performance trend of enterprises, we can see thatThe Chinese market is crucial for South Korean companies to maintain their share of the global semiconductor market.

The success of Korean chip manufacturers in the Chinese market reflects the dynamic changes in the global technology industry. With its strong technical strength and market strategy, South Korea has consolidated its leading position in the field of memory chips. At the same time, the huge demand for memory chips in the Chinese market has also brought huge profits to Korean manufacturers.

Looking ahead, with the rapid development of the AI ​​wave and the continued recovery of products such as smartphones and computers, the demand for memory chips is expected to rise further. Industry organizations predict that DRAM revenue will surge to $98 billion this year, an increase of 88% year-on-year; NAND flash memory revenue will reach $68 billion, a year-on-year increase of 74%.

In this context,South Korea's chip exports are expected to gain momentum.In the future, South Korea's memory chip exports to the Chinese market may exceed 200 billion yuan. This forecast not only reflects the strong strength of South Korea's chip industry, but also shows thatThe Chinese market plays a key role in the global chip industry chain.

How will South Korea choose sides in the Sino-US trade conflict?

From another perspective, the United States has always had an absolute say in the chip field. In order to prevent the rise of China's technology industry and take advantage of its chip technology advantages, the United States has imposed a comprehensive blockade on China's semiconductor industry, requiring American chip companies to cut off supply to Chinese companies. Even chip-related companies in Japan, South Korea, Europe and other countries have been under constant pressure.

The United States has repeatedly called on South Korea to strengthen chip export restrictions on China in order to hinder the development of China's semiconductor industry.

In April this year, Bloomberg reported that the United States asked South Korea to further restrict the export of advanced semiconductor technology and tools used to manufacture high-end logic and memory chips to China. Potential restrictions include logic chips over 14 nanometers and DRAM memory over 18 nanometers, which is consistent with a series of restrictions first announced by the US Department of Commerce in 2022.

South Korea is concerned that China may take potential punitive measures on export controls, and as some South Korean semiconductor companies are still operating in China, the scale of China's semiconductor exports to South Korea is increasing day by day.

South Korea is considering setting up a multinational framework to review export controls on sensitive products such as semiconductor-related equipment, its trade minister said. However, it would take months to implement any restrictions.

Prior to this, South Korea had also responded to similar requests from the United States many times.Adopting a delaying tactic or choosing options that are more in the interests of oneself.

Samsung, SK Hynix and other Korean chip companies have been pressured by the United States and asked not to supply AI chips to China. South Korea even needs to enact a bill to prohibit the use of American technology and components in the export and production process, which is equivalent to completely cutting off the supply of Korean chips to China.

Although South Korea has to obey the United States under pressure, it does not dare to act rashly considering that semiconductors are South Korea's pillar industry and the Chinese market is particularly important, which is related to the country's economic, technological and industrial development.

Therefore, South Korea's attitude towards China and the United States is always a bit ambiguous. On the one hand, South Korea does not want to go against the wishes of the United States, but on the other hand, South Korea does not want to lose the Chinese market. After all, once the supply cut-off and suppression strategy is adopted, it will bring huge economic losses to the Korean chip industry.

Amid the turbulent situation, South Korea has maintained a strong momentum in supplying chips to China.As long as there are no clear laws and policies, the Korean chip industry will seize every opportunity to speed up the export of semiconductors to China.

Regarding the impact of the above series of measures taken by the US government, researchers from the Korea Institute of Science and Technology (KIET), a think tank in South Korea, said that the view that the Sino-US trade war has put South Korean companies at a crossroads is changing. "South Korean companies have a 60%-70% market share in the global memory chip market. In the semiconductor field, exports to China account for a high proportion. From the perspective of end users in countries/regions, China accounts for 30%, the United States accounts for 30%, and the European Union accounts for 20%. Therefore, the United States cannot hinder the production activities of South Korean companies."

However, this is only a view of the short-term impact, and there may be an impact in the medium and long term.

In November 2023, the Korea Institute for International Economic Policy (KIEP) released a report titled "The Impact and Implications of the United States' Expansion of Semiconductor Export Control Measures," stating that although the above measures will not have a significant impact on South Korean semiconductor companies' production activities in China in the short term,Under the "reverse pressure", China's speed of localization in the fields of semiconductor manufacturing equipment and AI may threaten Korean companies.The report said the South Korean government and semiconductor companies need to pay close attention to future development trends.

It can be understood that in the futureSouth Korean semiconductors may, to some extent, be negatively affected by semiconductor export controls on China amid the Sino-US trade war.

In fact, in the second half of 2022, South Korea's semiconductor exports once fell into negative growth, and exports to China also continued to decline. This is not only due to the global economic downturn, oversupply in the semiconductor market, and falling memory unit prices, but also directly related to the US's containment and suppression of China's semiconductor industry.

On the one hand, the restrictive measures taken by the United States on Chinese semiconductors have triggered negative expectations for the industry. Samsung, SK Hynix and other companies have scaled back their plans to expand and upgrade their factories in China, which has had a chain reaction in South Korea's domestic semiconductor industry. Since supplying Samsung and Hynix's Chinese factories is a major export business for South Korean equipment manufacturers to China, the slowdown in the expansion of South Korean semiconductor giants has put South Korean suppliers in a difficult position;

On the other hand, in the face of the United States' increased export restrictions on China in the fields of AI chips and semiconductor manufacturing equipment, China's semiconductor industry has accelerated the pace of independent research and development and localization, which has also accelerated the process of domestic replacement of relatively technologically backward Korean equipment.

At that time, there were reports that South Korea's chip inventory had gradually soared, causing serious problems in the entire industrial chain.

Some Korean media pointed out thatIn the context of global economic integration, the development of industries in various countries cannot be separated from the support of the international market.The South Korean government should adopt more flexible and pragmatic policies when dealing with the Sino-US trade war or supply and demand contradictions, rather than simply blocking the Chinese market. Doing so will not only fail to solve the plight of the South Korean semiconductor industry, but may also lead to more losses.

visible,The US's trade issues with China are more likely to cause severe damage to South Korea's interests.

However, with the continuous escalation of US sanctions, although China-South Korea economic and trade relations have fluctuated due to the global economic environment and US interference, market logic and common interests still have a strong endogenous driving force to promote the warming of economic and trade relations between the two countries.

South Korean companies cannot separate themselves from the Chinese market, and China also actively welcomes the return of South Korean semiconductors. The two sides will jointly promote the development of emerging technologies in the two countries through win-win cooperation.

Especially as China steadily increases its investment in AI large-scale model research and development, the demand for HBM and NAND flash memory chips will inevitably expand. Therefore, excluding the interference of non-market factors, it can be predicted that South Korea's memory chip exports to China will continue to maintain a strong growth momentum in the coming months.

But we need to be vigilant. Bloomberg reported that the United States is expected to announce additional measures to restrict the supply of HBM to China at the end of August, which may cover "advanced memory chips and related manufacturing equipment such as HBM2, HBM3 and HBM3E from Micron, SK Hynix and Samsung Electronics."If this restriction is implemented, it will undoubtedly be another heavy blow to South Korea's semiconductor exports to China and cast a shadow on the prospects of China-South Korea trade.

Although the United States has taken action against China's semiconductor industry, it has also encountered complaints and dissatisfaction from the international community and many American companies. In addition to other allies, American companies such as Intel, Qualcomm, and Nvidia have also repeatedly opposed the United States' further tightening of export controls on China.

Final Thoughts

Business and politics, these seemingly complicated fields, are actually full of interests.

As one of the world's largest consumer markets, China plays a pivotal role in the development of the semiconductor industry. Facing the world's largest chip importer, even if the United States is unwilling to sell, there are always people interested in the "big fat meat" of the Chinese market, such as the Korean chip market.

The rapid growth of South Korea's semiconductor chip exports also reflects the importance and dependence of the Chinese market on South Korea's semiconductor industry. Despite the impact of the US chip ban, the South Korean government and semiconductor giants are actively cooperating with China by adjusting their strategies and strengthening their own strength.

This also shows that the cooperation and development of the semiconductor industry between China and South Korea has great potential. South Korean chip companies cannot be separated from the Chinese market, and China also actively welcomes the return of South Korean semiconductors to jointly promote the development of emerging technologies in the two countries through win-win cooperation. This mutually beneficial cooperation will further consolidate the position of South Korean chips in the Chinese market.

In the future, with the promotion of emerging technologies and the expansion of the market, China and South Korea can further strengthen cooperation and achieve mutual benefit and win-win results.