SEOUL, May 25 (AJP) - Chinese local governments are intensifying efforts to build comprehensive semiconductor supply chains, aggressively targeting South Korean materials, parts, and equipment suppliers with extensive incentive packages.
During a recent South Korea-China economic cooperation forum in Zhangjiagang, Jiangsu Province, Chinese municipalities showcased a strategic shift from simply attracting individual factories to developing entire high-tech industrial parks. Local governments are offering South Korean small and medium-sized enterprises (SMEs) a suite of benefits, including tax exemptions, factory sites, research and development (R&D) funding, and human resource support.
China's supply chain strategy involves distinct regional specializations. The Shanghai area is focusing on artificial intelligence (AI) chips and fabless design, while Jiangsu and Zhejiang provinces are expanding advanced manufacturing and packaging. Guangdong Province is building automotive and AI device ecosystems around local tech giants like Huawei and BYD, and the Sichuan-Chongqing region is investing heavily in backend processing and testing.
The aggressive Chinese outreach highlights structural vulnerabilities within South Korea’s domestic industry. While South Korea remains a global memory chip powerhouse led by Samsung Electronics and SK Hynix, its domestic SMEs are increasingly grappling with labor shortages, regulatory burdens, and a heavy concentration of resources in the Seoul metropolitan area.
The situation mirrors a broader global race in which the United States and Japan are deploying massive state subsidies—such as the U.S. CHIPS Act and Japan's support for Rapidus and TSMC's Kumamoto plant—to secure their national semiconductor ecosystems.
In response, industry observers in South Korea are urging the government to adopt a long-term national strategy. Experts suggest utilizing surplus tax revenues generated by the recent semiconductor boom to fortify the domestic ecosystem. Key recommendations include establishing regional semiconductor clusters beyond the capital region, upgrading the status of materials and parts suppliers, and creating university-industry pipelines to secure future technical talent.
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