South Korea's semiconductor substrate industry is confronting renewed pressure on its profit margins. According to reports, Samsung Electronics and SK Hynix are currently negotiating prices for second-half deliveries with their substrate suppliers. The semiconductor giants are leaning towards lowering or even reversing the price increases implemented at the start of the year, a move that would exacerbate the challenges for mid-sized substrate firms already under strain.
Citing industry sources, South Korean media reported that Samsung Electronics and SK Hynix had raised semiconductor substrate delivery prices by an average of approximately 3% to 4% early this year. This adjustment partially addressed substrate manufacturers' requests for price hikes due to surging costs of raw materials like gold and copper. However, with raw material prices now stabilizing, the negotiating leverage has shifted towards the buyers. The Secretary-General of the Korea Printed Circuit Association (KPCA), An Youngwoo, stated that multiple substrate companies currently in negotiations have received requests from their clients to lower prices for the second half. If these price cuts are implemented, the gains from the first quarter could be entirely negated.
Industry insiders express concern that this move will trap substrate manufacturers in a "double bind"—facing persistently high raw material costs while simultaneously seeing delivery prices pressured downward, squeezing profit margins from both sides. If this situation persists, it could constrain the substrate industry's capital expenditure and investment in next-generation technology R&D, ultimately impacting its overall competitiveness.
The KPCA has publicly addressed this issue, urging semiconductor manufacturers to postpone any price reduction initiatives. The association advocates for establishing a more sustainable supply chain cooperation mechanism that would allow the benefits of the current semiconductor upcycle to be shared across the entire industrial chain.
Price Reduction Pressure: Early-Year Gains at Risk of Reversal
According to industry information, major domestic semiconductor substrate suppliers in South Korea are currently in price negotiations with Samsung Electronics and SK Hynix for second-half deliveries. The substrate manufacturers are hoping for further price increases, citing persistently high procurement costs for raw materials like gold and copper, coupled with demand support from the current semiconductor upcycle.
In stark contrast, the semiconductor manufacturers hold the opposite view. Since delivery prices were already raised in the first quarter, it is understood that Samsung and SK Hynix are considering pulling prices back to their original levels for the second half. An Youngwoo indicated that the substrate industry widely anticipates delivery prices could be reduced as early as next month.
This pressure to lower prices is particularly challenging for mid-sized substrate manufacturers not covered by raw material cost linkage mechanisms. These mechanisms are designed to equitably share the risk of raw material price fluctuations among supply chain participants, but a significant number of mid-sized firms currently remain outside such arrangements.
The KPCA points out that the structural characteristics of the substrate industry make it highly sensitive to raw material price swings. If the cost pressure from sudden raw material price surges falls disproportionately on substrate manufacturers, it directly weakens their investment capacity and ultimately undermines their technological competitiveness. If slowing profit growth further squeezes capital expenditure room, the R&D progress for next-generation substrate technologies will also be hampered.
An Youngwoo emphasized that mid-sized substrate enterprises play a crucial role in South Korea's domestic semiconductor supply chain, acting as a vital link between large corporations and small-to-medium enterprises, and are indispensable for maintaining the overall industry's competitiveness. He called on semiconductor manufacturers to include substrate delivery pricing in discussions aimed at building a sustainable and competitive supply chain.
Industry Appeal: Sharing the Upswing Benefits for Collaborative Growth
The core argument from the substrate industry is that the benefits of the current semiconductor upcycle should not be monopolized by chip manufacturers but should extend to upstream partners like substrate suppliers to achieve mutual growth. The KPCA has explicitly called for the proposed price reduction demands to be postponed.
There is also a view within the industry that long-term, sustainable cooperation models should be promoted. This would enable substrate manufacturers, who have long borne the brunt of raw material cost pressures, to continue investing in R&D, capacity expansion, and quality improvement, thereby ensuring the overall resilience of the supply chain.
To address the situation, the KPCA has put forward a series of specific recommendations: reviewing and expanding the applicability of delivery price linkage mechanisms for mid-sized enterprises to improve risk-sharing in response to raw material price volatility; promoting the establishment of a supply chain cooperation council involving the government, the National Assembly, and industry; increasing policy support for key mid-sized enterprises in the semiconductor supply chain; and constructing a cooperative framework to ensure the sustainable competitiveness of the supply chain.
The KPCA stated that these measures aim to systematically address the structural vulnerabilities of the substrate industry at a systemic level and provide institutional safeguards for the long-term stability of the semiconductor supply chain.