Despite Biggest Semiconductor Boom
Korea’s lage companies such as Samsung Electronics and SK Hynix are recording the highest earnings with the boom in the memory semiconductor market but South Korea’s major fabless semiconductor manufacturers saw their performance worsen in the first half of this year compared to the same period last year.
According to an analysis released on September 5, 10 out of top 15 fabless semiconductor producers listed on the KOSDAQ in terms of sales saw their operating profit decrease in the first half of this year compared to a year earlier. Five out of 10 posted an operating loss. Only two companies showed growth in both sales and operating profit in the first half of this year compared to a year ago.
In particular, the operating profit of fabless semiconductor firms that design timing controller, a core component of liquid-crystal display (LCD) panels, and driver IC dropped more than 30 percent from the first half of last year.
Although system semiconductor is considered South Korea’s next growth engine after memory semiconductor, the domestic system semiconductor market conditions have been continuously sluggish unlike the memory semiconductor sector. This is largely due to the fact that the price of system semiconductor chips has dropped significantly as they faced a growing competition with Chinese fabless semiconductor companies. According to market researcher TrendForce, the number of Chinese fabless semiconductor companies increased from 736 in 2015 to 1,362 last year.
In addition, fabless semiconductor producers need to develop markets by rapidly developing new products due to the business characteristics. However, South Korean fabless companies are increasingly having difficulties in investing in research and development (R&D) to develop new products as their performance are worsened owing to the fierce competition with Chinese firms. Accordingly, industry watchers say that the domestic fabless semiconductor ecosystem is in crisis. The Chinese government injects a considerable amount of money in R&D and investment to grow fabless semiconductor manufacturers, but the South Korean government doesn’t provide much financial support to R&D.
According to the Korea Semiconductor Industry Association (KISA), the number of system semiconductor developments and product releases were 2.77 and 1.55 last year, down 13.7 percent and 28.6 percent, respectively, from a year earlier. Market researcher IC Insights said that only one Chinese company ranked the world’s top 50 fabless semiconductor producer list in 2009 but the figure reached 11 last year.
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