South Korea faces alarming semiconductor crisis

South Korea, one of the main global players in the production of semiconductors, is facing a crisis that could have very serious repercussions on the world economy. In August of this year, the inventory of chips in the country reached alarmingly low percentages: 42.6% compared to the same period in 2023. This is the steepest drop recorded since 2009, according to data from the National Statistics Office of South Korea.

This decrease is not a minor fact since semiconductors, especially memory chips, are the engine that drives the South Korean economy.

Furthermore, companies such as Samsung and SK Hynix not only lead the South Korean market, but also the international one. Samsung controls approximately 40% of the memory chip market, while SK Hynix owns 29%. The North American Micron Technology is right behind, with a share of 26%.

The current chip shortage occurs in a context of fierce global competition for dominance in the field of artificial intelligence (AI). This race, in which technological giants such as States participate, has triggered demand for advanced hardware, including semiconductors and GPUs (graphics processing units), essential for the operation of AI systems.

Consulting firm Allied Market Research estimates that by 2031, the market for chips for AI applications will generate more than $263 billion in revenue. This forecast is impressive, considering that in 2021 the market only reached 11 billion.

The growing demand for high-performance processors, such as high-bandwidth memory (HBM) chips, is one of the main drivers of this expansion.

South Korea has become a popular destination for the working holiday program

In response to growing global demand for chips, Samsung and SK Hynix have increased their production levels. In August 2024, semiconductor production in South Korea grew by 10.3%, and shipments increased by 16.1%.

However, despite these efforts, chip stockpiles have continued to decline to worrying levels. The demand is so high that not even the two largest South Korean companies in the sector, with all their industrial power, are able to supply the market sufficiently.

The main problem is that the challenge has become twofold: while the semiconductor industry in South Korea continues to grow at a robust pace, rapidly declining inventories threaten to tip the balance.

The figures are clear: South Korea’s industrial production grew by 3.8% in August, exceeding the expectations of economists, who had forecast an increase of 1.9%. However, this growth has not been enough to relieve pressure on chip stocks.

The decline in semiconductor stockpiles could have immediate consequences for critical sectors, such as the construction of data centers for artificial intelligence.

If HBM memory chip makers such as Samsung and SK Hynix fail to meet growing demand, AI-related projects may be delayed or even stalled.

The importance of HBM memory chips lies in their ability to handle large amounts of data at extremely high speeds, making them essential components in AI data centers. A prolonged shortage of these chips could slow progress in this sector, affecting companies and governments that increasingly rely on AI for their operations and strategies.

The perfect storm: an industry on the edge

The situation South Korea faces regarding chip shortages is not an isolated problem. The world is going through a phenomenon called a “perfect storm” in which supply cannot meet the growing demand for semiconductors. This situation is aggravated by geopolitical tensions and dependence on a few countries for the production of these essential components.

Chip miniaturization has reached levels that few manufacturers can handle, making investments in semiconductor factories increasingly expensive and technologically challenging. While South Korea has been one of the most successful countries in this race, the chip stockpile crisis shows that even industry giants can be overwhelmed by circumstances.