Chips in Flux: The Outlook for the Global Semiconductor Market and Implications for the Korean Economy

The global semiconductor industry has grown at an astonishing rate ever since semiconductors became a major part of the global economy in the 1980s. Not only has the industry been growing at a rate of upwards of 10 percent each year, but the time it takes for the semiconductor market to grow another USD 100 billion keeps getting shorter. Semiconductors can be divided into two main categories: memory chips and system chips. Over the last decade, the global markets for both have grown at consistent rates. New devices and electronics require both types of semiconductors and will continue to do so into the future. Semiconductors are integral to not just consumer electronics, but also to the development and growth of new technologies and industries. It is therefore not surprising that governments have begun to take active steps to secure access to semiconductors. However, the US and China are competing in a global fight for technological hegemony, and this battle has had adverse effects on the South Korean semiconductor industry. Since the COVID-19 pandemic, the governments of major economies worldwide have adopted various measures, including subsidies and grants, to attract semiconductor manufacturers to their respective jurisdictions. The recent downturn in the semiconductor business cycle is an outcome of a confluence of factors. These include the slower innovation cycle in semiconductor technologies, falling demand since the end of the pandemic, and ongoing uncertainties in the global economy. Booms in the chip market are fueled by strong demand, but signs of such a recovery are dim amid gloomy consumer and investor sentiment. In the long run, however, the global semiconductor market is poised to achieve significant growth, and at even more astonishing rates than before, thanks to the emergence of new technologies, including artificial intelligence, the Internet of Things, and self-driving cars.