South Korea sounds alarm on manufacturing hollow-out as AI server boom lifts Taiwan

South Korea’s alarm over manufacturing hollow-out reflects its marginalization in the AI server supply chain. TSMC’s dominance in CoWoS advanced packaging—handling over 90% of global AI chip outsourcing—has propelled Taiwan’s exports of HBM+GPU modules. While Korean firms lead in HBM3E memory, they lack heterogeneous integration capabilities with logic dies, locking them out of high-margin AI server ecosystems. U.S.-Korea semiconductor alignment mitigates equipment export risks but deepens reliance on China’s mature-node market, narrowing geopolitical arbitrage. Samsung is racing to scale FOVEROS as a CoWoS alternative, yet yield issues lag by at least a year; SK Hynix is instead securing design wins via tight partnerships with Microsoft and AMD. Without breakthroughs in chiplet interconnect standards or silicon photonics within 18 months, Korea’s role will degrade from strategic supplier to premium component vendor.