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(EDITORIAL from Korea Times on Oct. 18)

All News 06:59 October 18, 2021

Persisting chip shortage
: It's time to beef up semiconductor industry

South Korea's automotive and electronics industries are bearing the brunt of the persisting global semiconductor shortage. More worrisome is that the chip crunch shows no signs of easing anytime soon. This may slow the pace of the country's recovery from COVID-19's economic fallout unless radical action is taken.

Hyundai Motor, the country's largest carmaker, saw car sales plunge 34.6 percent year-on-year here in Korea last month, while suffering a 19.4 percent fall on global markets. Kia Corp. and GM Korea also reported drops of 14.1 percent and 66.1 percent, respectively, in combined local and overseas sales.

Those carmakers had to suspend operation on part of their assembly lines due to the shortage of automotive semiconductors which has continued since January. They find it hard to address the crunch since the global phenomenon directly affects their survival -- 200 to 300 chips are required to produce each car.

It is against this backdrop that Jose Munoz, Hyundai's global chief operating officer, floated the idea of the company developing its own chips last Wednesday to better cope with the shortage. He added that the company's parts affiliate Hyundai Mobis could play a key role in the development plan. However, it could take a long time and massive investment to produce in-house semiconductors.

The supply shock is not confined to the car industry. It has also hit Samsung Electronics, the world's leading memory chip and smartphone maker. The IT giant planned to unveil a new version of its Galaxy S21 smartphone this month, but it was delayed due to the semiconductor shortage. The company has also readjusted its parts suppliers' production schedules.

More seriously, the shortage of automotive chips and other system semiconductors is likely to deal a blow to memory chip producers such as Samsung and SK hynix. According to some foreign news reports, Apple may cut the production of its iPhone 13 by as many as 10 million by the end of the year due to the global chip shortage. If such a cut becomes a reality, it would reduce demand for DRAM chips to be used for smartphones. In that case, the domestic memory chip industry will face a slump.

The problem has become more complicated as the U.S. is trying to establish its own semiconductor supply chain in order to maintain a technological advantage in the great power rivalry with China. Semiconductors are a key item in the Fourth Industrial Revolution. The Biden administration sees the semiconductor issue as directly related to U.S. national security.

South Korea, for its part, must take bolder measures to tackle the supply shock. The Moon Jae-in administration needs to set up an extensive support system to beef up the semiconductor industry, particularly for non-memory chips. Developing new technology is crucial to honing the industry's global competitiveness. It is also urgent to push for deregulation and encourage innovation.

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