Japan was once the undisputed leader in the memory chip business, with companies like Fujitsu, NEC, and Toshiba pioneering cutting-edge chip technology. At its peak in 1988, Japan controlled 50% of the global semiconductor industry. However, by 2022, its share had plummeted to under 10%. Many factors contributed to this decline—some blame U.S. trade policies, while others argue that Japanese firms failed to innovate and keep pace with global competition. Regardless of the reasons, one country emerged as the new powerhouse in memory chips: South Korea.
South Korea’s Rise in Memory Chips
As Japan’s semiconductor dominance waned, South Korea took the lead, particularly in the NAND and DRAM memory chip sectors. Today, South Korean giants like Samsung and SK Hynix dominate the global memory chip market, collectively holding over 70% of the market share.
According to Q2 2024 data, Samsung secured 42.9% of the DRAM market with revenues of $9.82 billion, followed by SK Hynix at 34.5% and $7.91 billion in revenue. U.S.-based Micron Technology claimed the third spot with a 19.6% market share and $4.5 billion in revenue. Notably absent from the list were Japanese companies, marking a stark contrast to their once-dominant position in the 1980s.
The NAND flash memory sector tells a similar story. South Korean firms continue to dominate, though Japan’s Kioxia still holds a 15.1% market share—far below Japan’s former glory.
The History of the Memory Chip Battle
South Korea first entered the semiconductor industry in 1965 with the establishment of the Korea Institute of Science and Technology (KIST), supported by U.S. assistance. By 1967, foreign firms such as Fairchild and Motorola had set up transistor assembly lines in Korea, paving the way for the country’s semiconductor ambitions.
A major turning point came in 1974 when Samsung acquired Korea Semiconductor, signaling its intent to move beyond assembly and into manufacturing. By the late 1970s, Korean firms were producing simple chips and learning from Japanese partners through joint ventures with companies like Sanyo and NEC.
The decisive moment arrived in 1983 when Samsung’s chairman, Lee Byung-chul, announced in Tokyo that Samsung would fully enter the semiconductor memory business. This declaration, known as the “Tokyo Declaration,” marked the start of South Korea’s serious efforts in the industry. That same year, Samsung became the third country (after the U.S. and Japan) to successfully develop a 64K DRAM chip by leveraging technology from Micron.
The U.S.-Japan Trade War and South Korea’s Opportunity
In the mid-1980s, a trade war erupted between the U.S. and Japan, leading to the 1986 U.S.-Japan Semiconductor Agreement. The agreement forced Japan to limit its semiconductor exports and open its domestic market to U.S. firms. This effectively slowed Japanese chip production, creating an opportunity for new players.
South Korea capitalized on this opening. By 1987, Samsung was producing 256Kb DRAM chips, keeping pace with industry leaders. The South Korean government continued to support its domestic chipmakers by providing financing and R&D incentives.
By 1992, South Korea had overtaken Japan in the DRAM sector. Samsung became the world’s top DRAM producer, holding a 13.6% market share. The company continued its rapid technological advancements, introducing the world’s first 64Mb DRAM in 1992, 256Mb DRAM in 1994, and 1Gb DRAM in 1996. Meanwhile, Japanese firms struggled to maintain their market positions.
The 1997 Asian Financial Crisis and Further Consolidation
The 1997 Asian financial crisis severely impacted South Korea’s economy, but the semiconductor sector emerged stronger. In 1999, Hyundai merged its semiconductor unit with LG Semicon to form Hynix (now SK Hynix), reducing domestic competition and increasing efficiency.
During this period, Samsung doubled down on semiconductor investment, viewing it as crucial to Korea’s economic recovery. Meanwhile, Japanese firms like Mitsubishi and Texas Instruments exited the DRAM market. The last major Japanese DRAM player, Elpida, was formed in 1999 through a merger, but it ultimately could not compete with the aggressive expansion of South Korean firms.
The Corporate Strategy Behind South Korea’s Success
Samsung and SK Hynix have maintained their dominance through sustained investment in manufacturing capacity, allowing them to weather industry downturns. Samsung, in particular, follows a strategy of aggressive investment even during market slumps. For example, in 2017 alone, Samsung spent $21.5 billion on capital expenditures—more than double what Apple spent that year. This massive investment has led to economies of scale, making it difficult for competitors to match their production levels.
South Korean firms also employ aggressive pricing strategies to outcompete rivals. Samsung, for instance, gained dominance in NAND flash memory despite Toshiba’s initial technological lead by undercutting prices and flooding the market with supply. By 2005, Samsung controlled 50% of the global NAND market, while Toshiba held just 22%.
Conclusion
South Korea’s rise to semiconductor dominance was no accident. A combination of strategic government support, aggressive corporate investment, and favorable global trade shifts allowed South Korean firms to surpass Japan in the memory chip industry. While Japan remains a player through Kioxia, its presence is a fraction of what it once was.
Today, Samsung and SK Hynix control the industry, demonstrating how calculated risk-taking and long-term investment can reshape a global market. The question now is whether Japan can reclaim its former semiconductor glory—or whether South Korea will continue to dominate for decades to come.