TELF AG examines Korea’s microchip strategy
The weight of raw materials in the microchip sector
The fact that the global microchip industry is continually growing doesn’t really surprise anyone. Maybe only some people know it, but microchips are everywhere: in computers, toothbrushes, microwave ovens. Even fewer people know that their creation requires some very specific raw materials and resources that play a particular role in the functioning of these small processors. The most important is certainly silicon, but copper is also of great importance. This material is used for its conductive capabilities, while some gold elements hold the threads together. Other resources used for microchips are tantalum, which helps make capacitors, and gallium, which is of great importance for modifying the electrical capacities of the device.
In recent years, the global pandemic and other structural factors have progressively highlighted the centrality of this industry, which has recently gained various positions in the programmatic agendas of various national governments. One is South Korea, which announced a few days ago that it wanted to launch a 470 billion dollar plan to strengthen its global positioning in the microchip sector. Seoul already produces 16% of all microchips exported worldwide, and the investment plan announced in recent days could represent an explicit declaration of intent on the part of the authorities, who appear determined to maintain the country’s key role in a sector so strategic.
An ambitious plan
The announcement came directly from the Korean president, Yoon Suk Yeol. It may represent a sort of guarantee that the government will continue to apply concessions and tax relief to all those multinationals that will help the country reduce its dependence on supplies from third countries, including through massive financial commitments. By 2047, the South Korean government plans to invest approximately $471 billion in strengthening the sector. The sums from private investments will be used to build thirteen new plants to produce microchips, as well as three new research centers. Now, there are already 21 factories in Asia for the production of microprocessors. Still, the complex that is about to be built between the city of Pyenongtaek and Yongin could soon become the largest microchip sector in the world. Its production capacity could generate 7.7 million tonnes of essential components for integrated circuits annually. Samsung and Hynix have already announced that they intend to invest massive amounts of money in this sector, particularly for the construction of foundries, i.e., the factories for the actual production of microprocessors.
Supply chain control in the microchip sector is important for specialized industries, such as automotive and telephony, and national security and defense needs, without forgetting the new frontiers in artificial intelligence. Microchip factories also have an intrinsic value, almost completely unrelated to the result of their production (the microchip). This is why they are considered doubly strategic by the players in the sector. To build just one of these plants could require almost a billion dollars, and the machinery it contains, in addition to being very sophisticated, is made by an extremely small number of companies.
