Huawei’s launch of a 5G smartphone equipped with a 7-nanometer chip in August sparked immediate calls in the United States for stronger sanctions against China, highlighting the global significance of the U.S.-China tech competition.
However, upon closer examination, this U.S.-China tech rivalry also translates into a Korea-China tech race. In the NAND flash sector, China’s Yangtze Memory Technologies Co. (YMTC) is ramping up its production of 3D NAND flash, closely following leaders Samsung Electronics and SK hynix. Although there's a significant gap in the DRAM market, ChangXin Memory Technologies (CXMT) announced new product developments at the end of November.
In the display sector, BOE announced plans to invest in new organic light-emitting diode (OLED) lines, a staggering three times the investment scale of Samsung Display. In the foundry (semiconductor contract manufacturing) sector, Samsung Electronics is chasing TSMC, while Semiconductor Manufacturing International Corporation (SMIC) amazed the world by producing application processors (AP) with a 7-nm process.
According to a “2022 Key Products and Services Market Share Survey” by Japan’s Nikkei newspaper in September, Korea topped six out of 63 categories: DRAM with Samsung Electronics at 42.5%, NAND flash memory with Samsung Electronics at 33.7%, OLED panels with Samsung Electronics at 60.0%, smartphones with Samsung Electronics at 21.7%, ultra-thin TVs with Samsung Electronics at 19.0%, and shipbuilding with HD Hyundai Heavy Industries at 18.3%.
While Samsung Electronics dominated five electronics categories, HD Hyundai Heavy Industries led in shipbuilding. The United States ranked first in 22 categories, one-third of total sectors, followed by China with 16, and Korea and Japan tied for third with six each. China’s pursuit of semiconductor independence, especially in the sectors where Samsung Electronics leads like DRAM, NAND flash, and foundry, intensifies the Korea-China tech rivalry.
TrendForce reports that in the third quarter of this year, Samsung Electronics led the global DRAM market with a 38.9% share, followed by SK hynix with 34.3%, indicating Korean dominance. However, the gap in technology between Korea and China remains substantial.
Last month, CXMT, a Chinese DRAM manufacturer, announced the production of China’s first mobile low-power LPDDR5 DRAM. CXMT has officially launched a series of LPDDR5 products, with its 12 GB LPDDR5 chips already verified in smartphones from Chinese companies like Xiaomi and Transsion.
DRAM, where the technology gap was most significant, sees China closing in. Samsung Electronics announced its 12 GB LPDDR5 about four years ago. Chinese smartphone companies like Xiaomi and Vivo have been using LPDDR5 from Samsung Electronics and SK hynix. However, CXMT’s success in mass production could reduce China’s reliance on imports.
The gap between companies in the NAND flash sector is narrower. Samsung Electronics leads the global NAND flash market with a 31.4% share in the third quarter, followed by SK hynix (20.2%), Western Digital (16.9%), Kioxia (14.5%), and Micron (12.5%). YMTC is gradually increasing its market share, which has quadrupled from 1% in 2020 to 4.6% in just three years.
YMTC’s importance to China lies in the NAND flash sector, where the technological gap with world leaders is the smallest. While insurmountable gaps exist between Taiwan’s TSMC and China’s SMIC in the foundry sector, and a 4-5 year technology gap between industry leader Samsung Electronics in DRAM, the gap in NAND flash is just around two years.
YMTC has successfully developed and mass-produced 232-layer 3D NAND flash, closely chasing SK hynix (238-layer) and Samsung Electronics (236-layer). With U.S. sanctions blocking access to advanced semiconductor equipment from companies like ASML, YMTC’s role in developing China’s semiconductor supply chain becomes even more crucial. The Chinese National Semiconductor Industry Investment Fund (Big Fund) and others have invested US$7 billion in YMTC this year, underscoring its importance.
In the foundry sector, SMIC is proving to be a formidable competitor. With U.S. sanctions in 2020 preventing Taiwan’s TSMC from accepting semiconductor production orders from Huawei, China’s largest IT company, Huawei faced significant constraints. For the Chinese government, it was crucial to find a way to support Huawei, at the forefront of the U.S.-China tech rivalry.
SMIC stepped up to fulfill this role. At the end of August, Huawei released its Mate60 Pro 5G smartphone, featuring the Kirin9000s application processor produced by SMIC using a 7-nm process. HiSilicon, a subsidiary of Huawei, has already approached the world’s leading semiconductor design (fabless) technology, entering the top 10 semiconductor companies globally in the first half of 2020. The foundry sector remains a bottleneck in China’s semiconductor supply chain, placing significant responsibility on SMIC.
In the second quarter of this year, TSMC led the global foundry market with a 56.4% share, followed by Samsung Electronics at 11.7%. SMIC ranked fifth with a 5.6% share. However, other Chinese companies like Hua Hong Semiconductor (ranked 6th) and Nexchip (10th) are gradually expanding China’s influence in this sector.
Considering that most of the advanced technology areas China aims to develop overlap with ours, the U.S.-China tech competition essentially translates into a Korea-China tech race. Although China has overtaken the LCD market, Korea hopes to hold its own in the competition with China in sectors like DRAM, NAND flash, OLED, and foundry.
Samsung Display, which has almost monopolized the small and medium-sized OLED market, is now facing accelerated competition from Chinese display manufacturer BOE. OLEDs are divided into large TV-use OLEDs and small-to-medium OLEDs for mobile and laptops. Samsung Display has been dominating the global small-to-medium OLED market with 60-70% market share, thanks to its world-class technology.
Recently, however, BOE has been gradually increasing its market share. According to market research firm Omdia, in the first quarter of this year, Samsung Display’s share in the small-to-medium OLED market fell to the 50% range (54.7%), while BOE climbed to 19.2%, surpassing LG Display’s 17.4% to become the world’s second-largest manufacturer.
On Nov. 28, BOE announced an investment of 63 billion yuan to build an 8.6-generation OLED production line in Chengdu, Sichuan Province, China. BOE plans to produce high-end medium-sized OLED products targeting the OLED market for Apple’s MacBook and iPad. This positions BOE as a competitor to Samsung Display and LG Display, both of which count Apple among their major customers.
BOE’s investment amount is nearly three times the 4.1 trillion won that Samsung Display announced in April for the construction of the world’s first 8.6-generation production line. Since the early 2010s, with full-scale government support, Chinese companies like BOE and China Star Optoelectronics Technology (CSOT) have taken control of the LCD market through aggressive pricing strategies and massive production.