Choi Tae-won: "Next Year's Battle to Secure Semiconductors Will Be Chaotic... Chip Prices Must Come Down"

"Supply Must Be Expanded Even If Semiconductor Margins Fall"

"Next Year’s AI Semiconductor Demand Expected to Double Compared to This Year"

Performance Bonus Controversy: "No One Expected to Make This Much Money"

Continued Crisis in Korean Manufacturing: "No Industry Unique to Us"

Chey Tae-won, Chairman of the Korea Chamber of Commerce and Industry (KCCI), described the current semiconductor prices as "abnormal" and said that memory companies should expand supply even if it means lowering their margins. His concern stems from the possibility that continued increases in semiconductor prices, driven by the surge in demand for artificial intelligence (AI), could lead to "chipflation," where the prices of products in downstream industries such as PCs and smartphones rise, ultimately shrinking the semiconductor market in the long term. He also noted that AI semiconductor demand could increase by as much as twofold next year and described a situation in which countries and companies are in "utter chaos" as they scramble to secure semiconductors.

Regarding the controversy over the performance bonus system initiated by SK hynix, Chairman Chey commented, "No one could have known they would make this much money. That's probably why the system was set up that way," suggesting that improvements to the system could be considered if necessary.

At a press conference held during the "49th KCCI Jeju Forum" at the Shilla Hotel Jeju on the 15th, Chairman Chey stated, "Semiconductor prices need to fall," adding, "It may sound strange, but the current prices are abnormal." Addressing concerns that increasing semiconductor supply could erode price competitiveness, he said, "Even if profit margins decline somewhat, we must accept lower margins to expand supply and protect the market. Only by growing the market together can South Korea's semiconductor industry survive and develop."

He further emphasized that if companies continue raising semiconductor prices and do not build new factories, the market will contract, inevitably drawing in new entrants. He warned, "If we increase semiconductor prices further here, we become a target for backlash. We should not just try to scoop up everything for ourselves. We must ramp up production as quickly as possible to meet as much of the current demand as we can."

"Next Year's AI Semiconductor Demand Could Double"

Choi Tae-won, Chairman of the Korea Chamber of Commerce and Industry, is answering questions at a press conference during the 49th KCCI Jeju Forum held at Shilla Hotel Jeju on the 15th. Korea Chamber of Commerce and Industry.

He predicted that the pace of demand growth would still outstrip the expansion of semiconductor manufacturing capacities. Chey projected that demand for AI semiconductors could increase by at least 60% and up to 100% next year compared to this year. Since AI already accounts for over half of total semiconductor demand, if AI-driven demand doubles, the total semiconductor demand would increase by at least 50% to 60%. In contrast, he assessed that there would be virtually no additional new supply next year.

Chey stated, "The gap between supply and demand will only widen next year, reaching a state of utter chaos. Not only customer companies but also governments around the world are lobbying and applying pressure to secure memory semiconductors for economic security." He continued, "Whether or not companies can reliably obtain memory chips and manufacture products has become an issue that determines profitability. To absorb this supply-demand gap, not only must the pace of expansion increase, but the investment scale must also grow. That is why we're trying to build in every possible location."

Accordingly, SK Group is considering advancing the timeline for establishing the Yongin semiconductor cluster by 12 years ahead of the original plan of 2045. However, securing the necessary infrastructure, such as electricity and water supply, allocating construction labor, and preventing serious accidents pose significant challenges to shortening the schedule. Chey noted, "The question is whether we can really accomplish this, even if we devote all our manpower and resources. The infrastructure in Yongin is not yet perfect for water and electricity, and if we rush construction, we might cause accidents, making it difficult to move as quickly as planned. If that happens, it becomes much riskier."

He also saw overseas investment in manufacturing sites, including in the United States, as inevitable. Chey said, "We must seek every place in the world where it is possible to build factories," adding, "Priority should be given to locations where we can build the fastest and on the largest scale. This is now a matter directly tied to the lifeline of South Korea's semiconductor industry."

While data center expansion is happening globally, Chey stressed that Korea is not a power-deficient country. He explained, "Korea's power generation capacity (capability) is about 150GW, and we still have a reserve margin of 50GW." Since domestic peak power demand has never exceeded 100GW, Korea theoretically has excess generation capability if all facilities run at full capacity. He added, however, that there could be various constraints in the process of transmitting electricity to where it is needed, such as limits in substations and power grids.

He continued, "To meet the total amount of global AI data center construction required each year, an enormous amount of electricity is needed, and frankly, we do not yet have enough. Additional base-load generation is necessary."

On Performance Bonus Controversy: "No One Expected To Make This Much Money"

Chairman Chey Tae-won of the Korea Chamber of Commerce and Industry is answering questions at a press conference during the "49th KCCI Jeju Forum" held on the 15th at the Shilla Hotel in Jeju. Korea Chamber of Commerce and Industry.

Regarding the spread of controversy in the industry about SK hynix's performance bonus payments, which were linked to last year’s operating profits, Chey suggested that the scheme had been negotiated before the company entered its "semiconductor supercycle" and posted record earnings, and that the social repercussions of this outcome had not been anticipated.

He said, "I believe that SK hynix’s management and employees will work together to resolve this issue in their own way." He also dismissed rumors that the executive responsible for the performance bonus scheme had been dismissed, saying, "There is absolutely no truth to that claim."

Chey further emphasized the importance of considering not only the happiness of employees, but also that of shareholders, partner companies, and other stakeholders. He stated, "According to SK’s management philosophy (SKMS), the purpose of running the company is to promote the happiness of its members, but this is based on the premise that stakeholders must also be happy. The company’s position is that it’s not right to pursue only the happiness of employees at the expense of other stakeholders."

He added, "If performance bonuses infringe on stakeholders’ happiness and undermine sustainable happiness, we must take action and change the system. Conversely, if the system produces positive outcomes, we should observe them more closely before making adjustments."

On the 52-Hour Workweek: "No Indiscriminate Application... Free Will Should Be Respected"

Regarding the government's push for the "Mega Special Zone Special Act," which includes considering exceptions to the 52-hour workweek, Chey endorsed regulatory exemptions, saying that a flexible approach tailored to the characteristics of industries and companies is necessary. He stated, "Uniformly applying the rule to every industry, company, and society may be beneficial in some cases but not in others. If we indiscriminately enforce the 52-hour rule in every case with no flexibility, it becomes problematic."

He cautioned, however, that excessive recognition of exceptions could render the system ineffective, underscoring the need for broad social consensus. Chey particularly emphasized, "I hope that people’s free will can be respected more. Employers must observe the 52-hour rule, but if an individual wants to work more for personal achievement or circumstances, then they should be allowed to do so."

He noted, "Protecting workers and enabling them to work autonomously are compatible objectives. Laws should be designed so that people find them useful in society." Chey also referred to other systems, such as the inheritance tax, saying, "We are still relying on systems from the high-growth era of the past. Systems must be adapted to current growth conditions."

On the current state of South Korean manufacturing, Chairman Chey concluded, "We are in a continuing crisis," adding, "We haven’t found anything that only Korea can make." He forecasted, "Government plans related to AI must proceed quickly, and businesses should adopt them to truly improve productivity. Ultimately, the competition will be about who can harness AI most effectively to increase productivity and create cheaper, better products."

This content was produced with the assistance of AI translation services.