In the transformative era of artificial intelligence (AI), South Korea and Taiwan are leading the global semiconductor supply chain. While both countries enjoy a prominent status in the global IT ecosystem, they are also fierce rivals in a competitive landscape. As the United States pushes to reshape the semiconductor supply chain around its own interests, South Korea and Taiwan find themselves tested from different vantage points as a 'memory powerhouse' and a 'foundry powerhouse,' respectively.
The semiconductor industries in South Korea and Taiwan have emerged as critical factors not only in economic terms but also in security and diplomacy. The intensifying strategic competition between the U.S. and China inevitably impacts the already precarious regional security order. This context raises questions about whether South Korea and Taiwan can move beyond a 'zero-sum' competitive mindset to explore strategic cooperation.
In fact, the development processes and competitive structures of the semiconductor industries in South Korea and Taiwan are distinctly different. South Korea's greatest strength lies in its overwhelming technological advantage in the DRAM, NAND flash, and high-bandwidth memory (HBM) markets, which are essential for AI computations. Major integrated device manufacturers (IDMs) like Samsung Electronics and SK Hynix boast unparalleled execution capabilities in bold facility investments and mass production, maintaining a dominant position in the memory market based on years of accumulated advanced process technology. Notably, HBM has become a new growth driver, deeply integrated into the supply chains of global AI semiconductor companies like NVIDIA.
However, there are clear weaknesses. The heavy reliance on memory semiconductors creates a structurally vulnerable position that is extremely sensitive to economic fluctuations. In the foundry sector, South Korea struggles to close the gap with market leader TSMC in Taiwan. The market share in the fabless system semiconductor design sector remains minimal, around 1%. Additionally, the industry's dependence on foreign materials, components, and equipment, particularly in securing advanced extreme ultraviolet (EUV) lithography equipment from ASML in the Netherlands, highlights structural vulnerabilities, along with limited employment ripple effects across the industry.
Conversely, Taiwan's primary strength is its exceptional competitive edge in the foundry sector, led by TSMC. TSMC commands over half of the global advanced process foundry market and has nearly monopolized the trust of major fabless companies like Apple and NVIDIA. Other foundry firms, such as UMC, along with fabless companies like MediaTek and packaging firms like ASE, create a cluster that provides customized manufacturing infrastructure. This perfectly divided ecosystem leads to a stable revenue structure that is less affected by economic fluctuations and is recognized for its high premium valuation.
However, Taiwan faces challenges as well, including a low self-sufficiency rate in memory semiconductors, necessitating reliance on external sources, and a structural vulnerability due to over-dependence on TSMC. The most serious risk stems from geopolitical factors. Military tensions across the Taiwan Strait pose a constant threat to the entire Taiwanese semiconductor industry. The concept of a 'silicon shield' amplifies the instability of global tech companies' reliance on a single supply chain from Taiwan. Strategies to disperse advanced production facilities to the U.S., Japan, and Europe paradoxically reduce Taiwan's production share and weaken the effectiveness of the 'silicon shield.'
Amid these dynamics, China's semiconductor ambitions are accelerating. As the U.S. tightens export controls, China is committed to achieving 'technological self-reliance.' This aligns with President Xi Jinping's vision of industrializing strategic sectors like semiconductors to build a 'scientific and technological socialist state.' Notably, CXMT, a memory company listed on the Shanghai Stock Exchange, is rapidly expanding its market share in the DRAM sector with government subsidies, while SMIC is mobilizing national resources to secure advanced process technologies.
While China still faces significant limitations in cutting-edge processes and EUV equipment, CXMT is already entering the mature DRAM market by supplying DDR4 at half the market price, leveraging price competitiveness in the general semiconductor sector. Reports that global manufacturers like HP, Dell, Asus, and Acer are considering quality testing and collaboration indicate growing demand-side confidence. Furthermore, the Chinese government's political will and sustained resource investment could enable China's semiconductor ambitions to progress more rapidly than anticipated.
This presents a substantial long-term threat to both South Korea and Taiwan. However, there is potential for complementary cooperation between their semiconductor industries. As the paradigm of semiconductors driving the AI revolution shifts from 'single product manufacturing' to 'heterogeneous integration,' which combines logic semiconductors like GPUs with high-speed HBM for AI computations, the need for collaboration becomes evident.
At this juncture, South Korea and Taiwan have reached a structural intersection where they can no longer afford to maintain sharp rivalries. Even if TSMC possesses outstanding 2-nanometer and 3-nanometer foundry capabilities, the production of cutting-edge AI chips will inevitably falter without a smooth supply of South Korea's advanced HBM memory. Conversely, even if South Korea produces the world's best HBM, the risk of losing leadership in the AI market increases if it does not seamlessly integrate with TSMC's ecosystem and advanced packaging lines.
Already, there are practical signs in the market of collaboration between South Korean memory manufacturers and Taiwan's TSMC in the development of next-generation HBM3E and HBM4, as well as advanced packaging processes. In the rapidly changing AI era, the semiconductor war cannot be won by the strength of a single nation or company alone. By combining South Korea's 'memory super-gap' with Taiwan's 'foundry and ecosystem power,' they can become the strongest partners, complementing each other's weaknesses. Utilizing their respective technological advantages can promote global standardization and value chain integration, while also addressing geopolitical supply chain risks.
What is needed now is for South Korea and Taiwan to move beyond the 'chicken game' of competing to see who can surpass the other and instead focus on how to jointly lead the future market. Establishing a 'win-win' relationship that recognizes their interdependence is essential for maintaining a differentiated leadership in the AI semiconductor ecosystem.
Author: Kang Jun-young
Affiliations: Professor at Hankuk University of Foreign Studies, Ph.D. in Chinese Political Economy from National Chengchi University, Honorary President of the Korea-China Social Science Association, Head of HK+ National Strategy Project Group
* This article has been translated by AI.
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