South Korea Faces Semiconductor Industry Challenges Amid Global AI Boom

SEOUL — South Korea's semiconductor industry, a critical sector that accounts for a fifth of the country's exports, is facing significant challenges due to weak global demand and geopolitical tensions. The industry has seen a decrease in chip exports, contributing to a 7.4 percent drop in the nation's total exports in 2023. Samsung Electronics, a leading memory chip producer, reported its lowest operating profit since 2008, highlighting the sector's struggles.

According to Yonhap News Agency, the industry has shown signs of recovery towards the end of 2023, spurred by increased corporate investments in artificial intelligence (AI) and new electronic products. However, the surge in AI technology poses a double-edged sword for South Korean chipmakers. While AI devices require more memory storage, South Korea lacks a presence in the production of advanced AI chips, a market dominated by U.S. companies like Nvidia, AMD, and Intel. This gap threatens South Korea's position in the future AI chip industry.

The Yoon Suk Yeol administration has acknowledged the importance of maintaining the competitiveness of the Korean chip industry. Plans have been announced to build the world's largest chipmaking cluster, a $470 billion project that aims to enhance the production of advanced semiconductors and reduce dependence on the Chinese market. This initiative, along with efforts to acquire AI technology companies, represents Seoul's strategic response to the global shifts in semiconductor manufacturing and the burgeoning AI sector.

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