South Korea

Intelligence for Better Decision Making

TSMC and Samsung Accelerate 2 nm Chip Production Amid Intensifying AI Market Demand

Dec. 2, 2025 | Technology & Innovation

Leading semiconductor manufacturers are boosting production capacity and deploying advanced chip technologies to meet growing AI and high-performance computing demands.

**TSMC is ramping up its 2-nanometer fabrication capacity from seven to ten fabs in the Southern Taiwan Science Park, fueled by a roughly NT$900 billion investment.**
Surging demand for AI and high-performance computing chips—especially GPUs and CPUs for AI servers—drives the company to target requirements of the early 2030s. About 70 percent of TSMC’s US$40–42 billion capital expenditure in 2025 will go to advanced 2 nm and 3 nm processes. Domestic political pressures reinforce TSMC’s decision to keep its most advanced production facilities in Taiwan.

**Despite this ramp-up, supply constraints and higher pricing challenge TSMC’s 2 nm business.**
Its 2 nm chips cost at least 50 percent more than 3 nm devices, prompting some fabless companies to explore alternative suppliers. Samsung stands to gain customers seeking leading-edge production that offers more favorable pricing or availability.

**Samsung Electronics reports that its 2 nm process yields have climbed to 55–60 percent, approaching the level needed for viable mass production.**
Tesla, under a long-term contract for next-generation AI5 and AI6 chips, and Samsung’s own Exynos 2600 mobile application processor serve as key validation platforms to further boost yields. Samsung plans to start full-scale 2 nm manufacturing at its new Taylor, Texas, facility and integrate the technology into its flagship Galaxy S26 smartphone in 2026.

**Alongside its 2 nm efforts, Samsung has merged its dedicated high-bandwidth memory (HBM) development task force into the broader DRAM Development Office, consolidating process, design, and advanced packaging functions.**
This reorganization supports a unified memory strategy focused on HBM4 and HBM4E production and aligns with the upcoming Pyeongtaek P5 “AI mega fab.” That facility will co-locate HBM4/5 production alongside 3 nm and 2 nm foundry operations and advanced packaging, with the HBM design team centrally connecting foundry and packaging activities.

**Over the next two to three years, TSMC and Samsung will intensify their competition around production capacity, process yields, design support, pricing, and infrastructure development.**
The result of this contest will shape availability and costs of leading-edge semiconductor technologies, particularly in AI and high-bandwidth memory applications.

OpenAI’s High-Stakes Expansion Amid Surging AI Integration and Intensifying Competition

Dec. 2, 2025 | Competitiveness

The rapid evolution of artificial intelligence is transforming industries from search to education and testing the resilience of major developers.

**Since marking its third anniversary, ChatGPT has deepened AI integration across search, translation, coding, customer service and education.**
AI has emerged as a transformative platform that reshapes industrial structures and work dynamics. OpenAI, the developer of ChatGPT, confronts rising operational costs, fierce global competition and ongoing controversies over user safety and ethics.

**OpenAI has funded its rapid growth with massive investments in large-scale data centers and aggressive expansion strategies, yet it continues to run a substantial deficit.**
HSBC predicts annual revenue will climb from $12.5 billion in 2025 to $213.6 billion by 2030, while operating losses may widen to $76.5 billion. Key cost drivers include a revenue-sharing agreement with Microsoft, high costs of goods sold, extensive research and development expenditures and significant administrative expenses. Contracts with Microsoft and Amazon for cloud computing capacity total $250 billion and $38 billion, respectively, and could reach a cumulative $1.8 trillion. As infrastructure builds accelerate, annual data center rental costs could approach $620 billion.

**To support projected demand, OpenAI plans to invest $18 billion in the Stargate Project, partnering with SoftBank and Oracle to build five new AI data centers and secure 250 GW of capacity by 2033.**
Achieving financial sustainability depends on growing the user base to roughly 3 billion by 2030 to offset soaring infrastructure and operational expenses. Nvidia GPU–based servers require substantial power and physical space, further intensifying cost pressures.

**Competition in the AI sector is intensifying as rivals develop alternative hardware and models.**
Google is preparing Gemini 3, which will run on its proprietary Tensor Processing Units and aim to outperform GPU-based systems in speed, energy efficiency and multimodal tasks. Meta is reportedly evaluating Google’s TPUs over Nvidia GPUs. Industry experts expect future competition to hinge more on data center architecture, power efficiency and cost-effective computation than on model accuracy alone, making OpenAI’s reliance on Nvidia GPUs a potential vulnerability.

**OpenAI also faces controversies around user safety and content moderation.**
Lawsuits claim ChatGPT content contributed to harmful outcomes, including a teenage suicide; OpenAI rejects legal responsibility but acknowledges inherent risks in human-AI interactions. After its GPT-4–powered Kuma AI teddy bear provided inappropriate information to minors, OpenAI suspended the product. Meanwhile, the company plans to introduce adult content features with age and identity verification, a strategy analysts link to efforts to diversify revenue through premium subscription tiers.

Monitored Intelligence for South Korea - Dec. 2, 2025

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Chinese Ambassador Demands Japan Withdraw Taiwan Remarks

Chosun Ilbo | English | News | Dec. 2, 2025 | Geopolitical Conflict and Disputes

Tensions between China and Japan have intensified after Japanese Prime Minister Sanae Takaichi suggested possible Japanese military intervention in a Taiwan contingency. In response, Chinese Ambassador to Japan Wu Zanghao demanded that Japan retract these comments in a People’s Daily op-ed, accusing Takaichi of misjudging the situation and violating the One-China Principle and post-World War II international order. Wu emphasized Taiwan as an inseparable part of China’s territory and condemned any external interference, warning that Japan’s stance could provoke severe consequences.

The controversy escalated with Takaichi’s statement to the Japanese House of Representatives that a Taiwan crisis could justify Japan’s exercise of collective self-defense, implying readiness for military action. China increased diplomatic pressure, including provocative remarks by Chinese Consul General Xue Jian and economic measures such as travel and study advisories against Japan. Data shows a 16% reduction in Chinese airline flights to Japan in December, reflecting strained bilateral ties.

Military activity around Taiwan remains high, with Taiwan’s Defense Ministry reporting significant Chinese military aircraft incursions and naval operations near Taiwan over recent days. Satellite analysis indicates coordinated Chinese fighter jets and warships encircling Taiwan from multiple directions, signaling ongoing Chinese military posturing in the region.

Vice trade minister expresses regret over Canada's stronger steel safeguard plan

Yonhap | English | News | Dec. 2, 2025 | UndeterminedTrade Issues and Numbers

Vice Trade Minister Park Jung-sung expressed regret over Canada's announcement of stronger steel safeguard measures, urging a swift withdrawal of the plan. The measures reduce Canada's steel tariff rate quotas (TRQs) for countries with free trade agreements, including South Korea, from 100 percent to 75 percent of 2024 levels starting December 26, 2025. For countries without such agreements, like China, TRQs will decrease from 50 percent to 20 percent. Additionally, Canada will impose a 25 percent tariff on all steel derivative imports from the same date.

Park criticized Canada's steel safeguard plan as likely violating trade laws and undermining the World Trade Organization (WTO) rules-based multilateral trading system and the spirit of the Ottawa Group, a coalition of 13 WTO members led by Canada. He expressed concern that the measures could further burden South Korea's steel industry, already challenged by global oversupply and trade protectionism, and harm Korean companies' investment plans in Canada.

The vice minister emphasized the need to prevent damage to economic cooperation between South Korea and Canada, especially as the two countries aim to expand collaboration in strategic sectors such as defense, artificial intelligence, batteries, and critical minerals. Recent cooperation includes Canada short-listing Korea's Hanwha Ocean Co. as a finalist for its patrol submarine project.

Korea, Serbia to launch official negotiations for CEPA this week

Joongang Ilbo | English | News | Dec. 2, 2025 | UndeterminedTrade Issues and Numbers

Korea and Serbia are set to begin official negotiations for a comprehensive economic partnership agreement (CEPA) starting Monday in Seoul. The talks will span four days and aim to establish a free trade deal covering various sectors.

The negotiations will focus on 10 key areas, including tariff concessions, customs procedures, and economic cooperation. Serbia is viewed as a strategic hub connecting the European Union's neighboring markets and the Balkan region, making it an important emerging partner for Korean companies in sectors such as electric vehicles, batteries, and renewable energy.

According to Son Ho-young, acting director general for free trade agreement negotiations at Korea’s Ministry of Trade, Industry and Resources, this CEPA will enhance Korean companies' market access and help Seoul mitigate supply chain risks amid global trade uncertainties.

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