East Asia has been the hub behind memory semiconductor production since the 1980s and 1990s.  While Japan traditionally led the market in terms of sales, South Korea quickly overtook it with streamlined mass production and superior technologies. Recent reports predict such power dynamics will soon change with big investments from governments, particularly in light of the changing geopolitical landscape since the advent of the new administration in the White House.

Governmental Investments

South Korea’s top export item has long been semiconductors. The country is home to two leading semiconductor manufacturers, Samsung Electronics and SK Hynix. Despite gloomy predictions regarding growth, year-on-year exports increased by 43.9%, recording US$141.9 billion in 2024, driven by demand for premium chips and the global decline in semiconductor prices.

However, with the country facing an unprecedented challenge due to the lack of governmental support for this critical sector, owing to the short-lived martial law declaration of the incumbent president, some experts believe there is a real possibility that neighbouring countries, which are making larger investments, could surpass South Korea.

For instance, China has been assembling significant funds for domestic semiconductor companies. In 2014, the State Council of China issued the “National Guideline for the Development and Promotion of the IC Industry” to support the sector, raising more than US$21.8 billion during the first financing round. The amount doubled in the second financing round in 2019 and more than tripled in the third round last year.

Semiconductor powerhouses

Among China’s fastest-growing manufacturers are ChangXin Memory Technologies and Semiconductor Manufacturing International Corporation (SMIC). SMIC ranked third in the global foundry revenue during the first two-quarters last year, thanks to the government’s aggressive support in reducing manufacturing costs and the collaboration with tech giant HUAWEI.

Tokyo also has been making substantial investments in the sector. Over the past three years, the country has provided subsidies to domestic manufacturers, amounting to US$26 billion. Prime Minister Shigeru Ishiba, who was re-elected last year, has pledged to invest 10 trillion yen (US$67.1 billion) in the semiconductor and artificial intelligence (AI) sectors by 2030.

A prominent leader in Japan’s semiconductor industry is Rapidus, a foundry established in 2022 with partnerships with industrial leaders like Toyota and Sony. According to reports, the government plans to invest an additional 200 billion yen to foster the company’s development.

Trade Policies: Game Changer in the Industry

As the semiconductor industry is heavily reliant on exports, its landscape is particularly susceptible to the trade policies of global powers like the United States. For instance, the U.S. imposed a 50% tariff on Chinese semiconductors starting this year, aiming to protect its domestic manufacturers. The country’s trade representative recently stated that the U.S. should work closely with its allies, such as Japan and South Korea, to strengthen semiconductor trade.

Another notable development is the recent announcement by Taiwan Semiconductor Manufacturing Company (TSMC), the largest semiconductor foundry in the world, recently announced to invest US$100 billion in the U.S. Many experts view this as a “protection fee” to safeguard Taiwan from potential Chinese aggression. TSMC is rumoured to be finalising a partnership with Intel, expanding its influence in the Northern American market. Despite the U.S. regulations, some experts have a positive outlook on China’s development in the sector. “China has become increasingly self-reliant – it can now build high-tech equipment that the U.S. has banned from being exported,” said Kim Hyung-joon, Director-General at KIST’s Post-Silicon Semiconductor Institute.