South Korea to consider setting up $3.1 bln foundry to grow local chip sector

Add Industry minister comments, details of foundry

By Joyce Lee and Hyunjoo Jin

SEOUL, Dec 10 (Reuters) - South Korea is considering building a 4.5 trillion won ($3.06 billion) foundry to make essential chips, funded by state and private investment, part of efforts to gain an edge in a race to nurture local semiconductor firms as demand for AI chips grows.

President Lee Jae Myung presided over a meeting on Wednesday attended by executives from chipmakers, including Samsung Electronics 005930.KS and SK Hynix 000660.KS, as well as policymakers and experts, to lay out plans to maintain the country's lead in memory chips, strengthen the foundry business and expand fabless chip design in the artificial intelligence era.

"South Korea needs to take a new leap forward, and... the semiconductor sector is an area where we are very competitive," Lee said.

South Korea, home to the world's two biggest memory chip makers, Samsung Electronics and SK Hynix, has been struggling to catch up in the contest to design and manufacture logic chips, led by Taiwan Semiconductor Manufacturing Co Ltd 2330.TW as well as Nvidia, Qualcomm and other firms.

South Korea will consider setting up a 12-inch, 40-nanometre foundry to help fabless firms develop and test legacy chips that are used in cars, data centres and other applications, the industry ministry said in a statement.

The ministry said it will consult with South Korean foundry companies, like Samsung Electronics and DB HiTek 000990.KS, to set up the facility, which will be jointly funded by the public and private sectors.

"We face a very serious crisis and challenge. The semiconductor industry has already escalated from competition between companies to war between nations,” Industry Minister Kim Jung-kwan said, citing competition between China, the U.S., Europe and Japan to support their own chip industries.

South Korea will also seek to produce locally defence-related semiconductors, given that the sector relies on imports for 99% of its supplies, the ministry said.

The government will consider putting in a provision for the priority purchase of domestic semiconductors in national security infrastructure in a related law, it said.

A special committee on semiconductors will be established under President Lee to act as the control centre for national policies on chips, the statement said.

($1 = 1,471.0200 won)

(Reporting by Joyce Lee and Hyunjoo JinEditing by Ed Davies)

((joyce.lee@tr.com;))