In the 90s of the 20th century, with the spring breeze of China's reform and opening up policy, enterprises in many countries have seized this rare development opportunity and actively entered the Chinese market. As one of them, South Korean chip companies have given full play to their technical strength and successfully won the favor of Chinese consumers. Take well-known companies such as Samsung and Hynix as examples, they quickly occupied a place in the Chinese market with their strong technical strength and high-quality products in the field of semiconductor chips, and won a large number of orders and significant sales performance in a short period of time.
The successful cases of these outstanding enterprises fully prove that as long as they have excellent technical strength and innovative spirit, they can stand out in the fierce market competition and win the favor and recognition of consumers.
Taking Samsung as an example, as an important chip foundry in the world, Samsung's DRAM Memory products have always occupied half of the Chinese memory market. The South Korean company has continuously invested in research and development, improving the quality and efficiency of its products, while constantly introducing new products to meet the needs of the market, which has also brought it a lot of profits. In addition, Samsung has also actively carried out marketing and promotion activities around the world, strengthened communication and connection with consumers, and strengthened brand awareness and influence.
The success of Samsung's products is a testament to the company's strength and competitiveness in the semiconductor field.
As the world's leading manufacturer of smartphones, semiconductors and memory, Samsung's performance in the Chinese market is particularly prominent, and it is highly recognized by consumers, and it is not uncommon for related products to be in short supply in the market. This grand occasion has undoubtedly directly promoted the continuous improvement of Samsung's revenue and profit levels, and continues to create record highs.
Public data shows that in the 21 years from 2000 to 2021, Samsung's sales in the Chinese market have grown by more than 15% every year, among which after the advent of the smartphone era, Samsung is an important manufacturer of Android flagship mobile phones, and its AP and modem chips are scrambling to be purchased by many mobile phone manufacturers around the world, which also fully demonstrates Samsung's leading position in chip technology and market competitiveness.
The slogan "Bureau series processors, made by Samsung" is still deeply rooted in the hearts of the people today, and is frequently used to describe Samsung's outstanding achievements in the field of technology.
The same is true of Hynix. With its excellent technology in the field of storage, Hynix's NAND Flash products are widely used in mobile phones, laptops, digital cameras, camcorders and other terminal devices, and are also favored by many servers and data centers. In the global storage market, Hynix ranks third in the field of NAND Flash, but in the Chinese market, Hynix's market share is as high as 30%, becoming the leader of NAND Flash in the Chinese market. Hynix has won the trust of the market and customers with its high-quality NAND Flash products and reliable performance, and has achieved an important position in the global storage field.
In an interview with reporters, Li Jianxi, chairman of Hynix, said that the Chinese market plays a vital role in the development of Hynix's enterprises, is the main pillar of Hynix's global layout, and is of great significance to Hynix's long-term development.
It can be said that the Chinese market has played a vital role in the development of South Korea's chip industry, which has greatly promoted the development and growth of South Korea's chip industry. Whether from a historical perspective or from the current situation, the Chinese market is an indispensable and important market for the Korean chip industry. For the management of Korean companies, they are very pleased with the complementarity of time, place, and people between the two countries, so they unanimously believe that the future of chip cooperation between China and South Korea is bright, which will bring huge business opportunities to Korean companies.
At the same time, the cooperation in the chip industry between the two countries can also further improve the technology and process level of both sides to achieve a win-win situation.
However, the chip war between China and the United States has become the main culprit in extinguishing this light. Since 2018, the Trump administration has continuously launched a crackdown on China's chip industry, restricting Chinese companies' investment in the United States, and prohibiting American chipmakers from providing technical support and services to Chinese companies. The move exacerbated the tension between China and the United States in technology and trade, and had a negative impact on global economic stability and supply chain stability.
As the younger brother of the United States in the Asia-Pacific region, in order to firmly stand on the side of the United States in this contest, the ROK has no choice but to drastically reduce its exports to China, and this has undoubtedly had a considerable impact on the economic and trade relations between the two countries.
This is undoubtedly worse for the Korean chip industry. Samsung, for example, saw its sales in China fall by 30% in the early days of the sanctions, and then plummeted, with exports to China almost halved in 2022, putting huge pressure on its global market share growth. Due to the impact of sanctions, the future development of South Korea's chip industry will face huge challenges.
In addition to Samsung, the situation of other Korean companies in the Chinese market is also not optimistic. For example, the share of SK hynix and SK hynix in the Chinese market has dropped sharply from about 60% in the past to about 20%, which has brought great pressure and challenges to enterprises.
It is truly embarrassing that these companies, which once relied on the Chinese market to start, are now facing heavy blows and layoffs. Even in the context of the volatility of the global semiconductor industry, most Korean chip practitioners are mentally prepared to mitigate the risks caused by the volatility of the Chinese market by exploring other markets. However, the sudden loss of the Chinese market still caught them off guard.
In the face of the impact of the epidemic, Samsung Electronics had to close its Kultureinricht factory in Suzhou, China, because its supply chain was disrupted due to the impact of the epidemic, and employees could not go to work normally, resulting in a serious impact on product production, in order to minimize the losses caused by the epidemic, Samsung Electronics had to make this difficult decision. On the other hand, South Korean company Hynix also had to suspend its plans to build a chip test plant in Wuhan, China.
Although Hynix has been looking for ways to continue its construction plans in Wuhan after the epidemic is over, the current global epidemic situation is still severe, which has brought great uncertainty to Hynix's construction plans in Wuhan, therefore, for the sake of the company's stable operation, Hynix had to make the decision to suspend its chip test plant construction plans in Wuhan.
At the same time, due to market competition and rising raw material prices, the performance of Samsung and Hynix has also declined significantly. Specifically, public data shows that in the first half of 2022, the profit of Samsung's semiconductor division fell by a staggering 96% year-on-year, a figure that undoubtedly reflects the huge challenges and dilemmas faced by the industry. It is worth noting that in the past year, the development of the semiconductor industry has been affected by a number of factors, such as chip shortages, weak demand, global inflation, etc., which have brought a lot of impact to the global semiconductor industry.
The same happened to Hynix, whose net profit was only 600 billion won, a far cry from its previous achievements. Obviously, the current market environment has put a lot of pressure on the business operations of semiconductor companies such as Hynix, and they need to take corresponding measures to deal with it. Under such circumstances, how to respond to market changes while maintaining competitiveness and finding new growth points has become an important issue for these companies.
Due to the fluctuation of the global economic situation and market demand, South Korea's chip industry is going through a difficult time, and a large number of practitioners are caught in confusion and anxiety about the future.
In stark contrast to the gradual decline of South Korea's chip industry, due to the impact of factors such as the Sino-US trade war and the epidemic, China's chip industry has ushered in a period of opportunity for rapid development. In response to the technological blockade by the United States, the Chinese government has unswervingly invested a lot of money in the development of an independent and controllable chip industry, and has achieved remarkable results.
With the rapid development of the technology industry, the competition among major enterprises is becoming more and more fierce, and in this fierce competition, companies such as Haiguang, Unisplendour and Yangtze River Storage are growing into industry leaders at an astonishing speed, injecting new vitality into China's technology industry.
In particular, the wave of demand in China's domestic market has brought many development opportunities and challenges to these local chip companies. Taking memory chips as an example, according to relevant statistics, in the first half of 2022, the share of domestic enterprises in the domestic market has exceeded 60%, while the share of overseas brands in the Chinese market continues to decline. Such results not only show the strength and development potential of the mainland chip industry, but also show the reliability and competitiveness of domestic chips to a certain extent, laying a solid foundation for the further development of the local chip industry.
As of November 2021, Haiguang Storage's share price has skyrocketed 7 times in just one year, creating an impressive record in the A-share market, and quickly becoming a new generation of stock market giants.
In contrast, Samsung and Hynix, which once occupied half of China's storage market, are now the biggest victims. Not only have they lost China's $100 billion "gold mine", but their global market share has also been declining, and their market value and brand influence have shrunk at a visible rate.
The South Korean government and industry insiders have only now realized that they have grossly underestimated their dependence on the Chinese market. According to public data, China has always been South Korea's largest trading partner, with bilateral trade exceeding US$300 billion in 2022, of which South Korea's exports to China reached US$150 billion, accounting for nearly 30%.
Industry leaders such as Samsung and Hynix account for more than 50% of the Chinese market.
As a result, there is a wave of remorse in South Korea's semiconductor industry. However, there is nothing South Korea can do about this wrong decision. China's huge domestic demand market has begun to circulate independently, and the degree of dependence on foreign countries is declining at the fastest rate.
And once such a situation is formed, it is very difficult to open it again. For the Korean semiconductor industry, it can be said that it is self-inflicted, and it can only reluctantly accept this cruel fact.
Against the backdrop of industry difficulties, the South Korean government and companies have gradually realized that severing diplomatic relations with their old friend China is a major strategic mistake. In order to save the domestic economy, the South Korean government has repeatedly expressed its desire to restart economic and trade cooperation with China. Some companies are also looking for opportunities to return to the Chinese market.
But it didn't take long for them to find out that their breakup had erected an invisible wall between China and South Korea. Trust in Korean brands by Chinese companies and consumers has plummeted, and domestic alternatives are taking over the market at a rapid pace.
The Chinese market is difficult to reopen, and the inventory pressure of $75.2 billion in chip products is serious, and the task of destocking is very arduous.
This "divorce war" has brought high-level relations between China and South Korea to a freezing point, which is a more serious problem. Relations between the two countries can deteriorate rapidly in a short period of time, but repairing them will be a long and difficult process.
First and foremost, we need to rebuild strategic trust.
The sanctions imposed on China under the manipulation of the United States have seriously damaged South Korea's image in China. There is a profound crisis of confidence between the two countries, and a few simple statements and commercial contracts will not really solve the problem.
In order to truly repair future relations with South Korea, the South Korean government must make the Chinese side feel the sincere desire of South Korea to rebuild friendship through sincere diplomacy. Then, South Korea also needs to cultivate trust in economic and trade exchanges and gradually deepen the understanding of mutually beneficial cooperation between the two sides.
Cultivating friendship in exchanges in different fields is a long process and full of difficulties.
Therefore, for the South Korean government and business policymakers, they need to be prepared with a lot of patience, because restoring relations with old friends is not an overnight task.
Only by maintaining strategic communication between the two sides can the barriers between the two sides be gradually bridged and the China-ROK cooperation structure in the new era can be reshaped.