Semiconductors, especially DRAM chips used both in servers and in the fast-growing mobile business, are one of the few industrial items in which Korean companies reign supreme globally. So a Chinese chip design company's stated bid for Micron Technology last week was an important development that could put additional strain on Korean chipmakers.

China's Tsinghua Unigroup said it had prepared a $21 per share or $23 billion offer for Micron, the only remaining U.S. memory chipmaker, in what appears to be China's biggest ever takeover bid.

Presently, chances are slim that the deal will happen. First and foremost, the bid seems too low for Micron shareholders.

The U.S. administration is also unlikely to approve the deal because of concerns about national security and technology leakage.

But that doesn't mean that Korea can be complacent. More than anything else, China's investment in the semiconductor industry will certainly pose a grave threat to Samsung Electronics and SK hynix.

China has designated semiconductors as one of its key next-generation industries and has plans to invest 175 trillion won over the next decade. Tsinghua Unigroup, founded in 1988 by China's elite Tsinghua University, has strong backing from the Chinese government and has formed partnerships with some of Silicon Valley's top firms. Intel announced last year that it would buy a 20 percent stake in Tsinghua Unigroup for $1.5 billion.

Against this backdrop, a successful acquisition of Micron by Tsinghua would take a toll on Korean chipmakers amid a revived semiconductor game of chicken around the world. Even if the takeover bid ends in failure, China is expected to continue its efforts to take over other semiconductor firms.

China is not hesitant about supporting its own chipmakers to raise its self-sufficiency in memory chips, which will prompt Korean businesses to increasingly lose ground in the huge Chinese semiconductor market.

In the 1980s and 1990s, the winner of the global memory chip battle was Japan. Since then, Korean chipmakers have devoted themselves to technical development and facility investment amid a supply glut and plunging prices. The result is that Samsung and SK hynix rank first and second globally.

China's strong push for the memory chip business could create a price war among chipmakers. There is no denying the possibility that Korea might be overtaken by China in the semiconductor industry as it has been in other flagship industries such as shipbuilding and steel production.

What's urgently needed is to minimize the outflow of our strategically important semiconductor technologies into China, which will require the government to craft a long-term strategic approach. It's needless to say that our chipmakers should conduct preemptive investment along with active research and development.

By: DocMemory
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