Maintaining chip leverage in the future

If the country drags its feet, it will lose its chip leverage.

The leading indicator of future competitiveness of semiconductor technology is sounding the alarm for Korea after the share of its international patents declined sharply over the past 20 years. A joint analysis by the JoongAng Ilbo and the Korea Chamber of Commerce and Industry shows Korea’s share dramatically fell to 2.4 percent last year from 21.3 percent in 2003. During the same period, the share of the United States and China combined soared to 92.9 percent from 45.6 percent. In particular, China’s ratio surged to 71.7 percent from 14 percent.

Korea’s structural weakness is the same as before. Though the country leads in the high bandwidth memory category, it still lacks patents for the system-on-chip category, according to the Korean Intellectual Property Office.

As Korea has a narrow technology gap with competitors, they could catch up in several months. Patents are the basis for maintaining an unbridgeable gap with rivals. Though the number of patents do not directly translate into technological competitiveness, it is a key barometer of the future growth of the semiconductor industry.

The chip war is in full force. Each country is doing all it can to build or rebuild its semiconductor ecosystem. The United States and China have been speeding up to reshape the global chip-supply networks through hefty subsidies and various tax incentives. Japan is moving fast, too. The country attracted global foundry leader TSMC to build a factory in Japan by offering subsidies up to 50 percent of its investments. Japan even relocated an international school to the place where the TSMC factory is being built and opened a Taiwanese class to help children of workers from Taiwan. Tokyo also invests heavily in the materials, parts and equipment companies. Some analysts expect Japan to outpace Korea in chips in a decade.

Korea needs to be awakened. Chip producers must widen the technology gap even further and strengthen competitiveness in the chip materials and equipment sector to survive the turbulent waves from outside. To do that, chipmakers must demonstrate creative entrepreneurship, invest heavily in research and development, and secure excellent talents. The government must help them maintain their competitiveness through subsidies.

Thirty years have passed since the late Samsung Group Chairman Lee Kun-hee famously told executives “to change everything except for your wife and children.” The message is still valid. If the country drags its feet, it will lose its chip leverage.