In 2023, recognizing the importance of the semiconductor industry in the Korean economy, several governmental bodies initiated a comprehensive review to introduce measures aimed at fostering its growth. As a part of these efforts, the Korea Fair Trade Commission (“KFTC”) conducted an information-gathering survey focused on understanding the competitive dynamics across the semiconductor manufacturing market and its associated upstream and downstream sectors (“Market Survey”), with the aim of formulating pro-competitive administrative measures to support the industry’s advancement.
The Korea Advanced Institute of Science & Technology (“KAIST”), with its expertise in the semiconductor field, conducted the Market Survey on behalf of the KFTC. KAIST recently submitted its findings to the KFTC, and although the complete report is confidential until December 2025, certain sections have been disclosed. These disclosed sections provide valuable insights into specific competition issues within the semiconductor industry addressed by the report.
We provide below a summary of the issues presented in the KAIST report.
I. SUMMARY OF THE KAIST REPORT
The KAIST report highlights a notable surge in demand for various semiconductors, attributed to the advancement of new AI technologies. This encompasses an increased need for graphics processing units (GPUs) in data center computers, neural processing units (NPUs) for on-device AI applications, semiconductors catering to communication and IoT, memory semiconductors essential for autonomous vehicles, as well as semiconductors for sensors, communication, and memory in smart power grids. The demand for these semiconductors is experiencing rapid growth, with annual rates ranging from at least 10% to as high as 20%.
Specifically, the report noted that a select few fabless companies specializing in system semiconductor design wield significant influence and are at the forefront of technological advancements in various downstream industries. From a competition standpoint, the report highlights companies with dominant or superior positions within segmented markets of semiconductor design and manufacturing, outlining potential anti-competitive implications that may arise as a result.
- For example, the report highlighted that the market for GPU semiconductors used in data center AI computing is dominated by a single player with a 90% market share, a position expected to remain unchallenged; it underscored that the KFTC should be aware of the potential abuse of market dominance that may result from such monopoly over the market.
- The report further observed that as semiconductor devices continue to scale down, the market is increasingly becoming centralized around a few foundry companies. The number 1 player leads the market with its 60% market share, followed by two other global players, each holding 12% to 15% market share. The report raised concerns that these few foundry companies may abuse their superior positions in the market and prevent small and mid-sized fabless companies from entering the market.
- The situation is also similar for the electronic design automation (EDA) software market, which is largely dominated by two companies. Given the path-dependent nature of software solutions in the semiconductor manufacturing value chain, the report highlighted the potential for these market-dominant companies to engage in unfair trade practices by leveraging compatibility with their software solutions.
II. TAKEAWAYS
The semiconductor industry stands as one of the ICT sectors under the keen focus of the KFTC in recent years. We anticipate that the KFTC may further explore the issues highlighted in the KAIST report and initiate a follow-up investigation. Moreover, it is also conceivable that any findings resulting from this subsequent inquiry may prompt investigations into global companies operating in other segments of the semiconductor industry for potential violations.
This expectation aligns with the KFTC’s ongoing investigative efforts, as well as its 2024 operational plans released in February, in which the KFTC expressed its commitment to investigating and correcting unfair practices within the semiconductor industry. In this regard, it may be advisable for stakeholders and participants within the semiconductor industry to closely monitor the developments ensuing from this Market Survey.
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