U.S. President Joe Biden is holding a semiconductor chip and mentioning the purpose of the executive order on building a semiconductor supply chain before signing the order at the White House on the 24th (local time). [Washington EPA=Yonhap News] Photo by Yonhap News
[Asia Economy Reporter Kim Heung-soon] As U.S. President Joe Biden has ordered a review of supply chains for key items revealing structural supply and demand issues, domestic related companies are now in a situation where they must carefully weigh the pros and cons. Semiconductor companies, whose export ratio reaches 95%, are particularly sensitive. While it would be positive for domestic companies planning exports or local investments if the U.S. government strengthens cooperation with allies to support the semiconductor industry, the relationship with China, which accounts for about 40% of export value, cannot be ignored.
On the 24th (local time), President Biden signed an executive order at the White House to conduct a 100-day review of the supply chains of four key items: semiconductor chips, large-capacity batteries for electric vehicles, rare earth elements, and pharmaceuticals. What President Biden especially emphasized that day was semiconductors. Holding up a semiconductor before the press, he stressed the necessity of semiconductor production within the U.S. He also expressed his intention to push forward legislation to support semiconductor funding.
If the Biden administration focuses on expanding the semiconductor supply chain and strengthens efforts to nurture domestic companies or attract foreign companies, it is expected to work favorably for Korea. For example, Samsung Electronics has built trust by operating a semiconductor plant in Austin, U.S., since 1998, and based on this, it is scouting suitable locations to expand its factories within the U.S. Several state governments, including New York, have already sent love calls to Samsung Electronics.
On the other hand, if the Biden administration’s decision develops in a direction to check China in the future, major domestic semiconductor companies will inevitably face concerns due to China’s significant share in the semiconductor industry. According to the Korea International Trade Association, Korea’s semiconductor export value over the past year from January last year was about $107.9 billion (approximately 119 trillion won), of which China accounted for the largest share at about $43.3 billion (approximately 48 trillion won). In May last year, China’s share of total exports nearly reached half at 46.4%. Samsung Electronics and SK Hynix are known to have China accounting for half of their semiconductor export value. Additionally, Samsung Electronics operates a semiconductor plant in Xi’an, China, and SK Hynix operates one in Wuxi.
An industry insider said, "China’s IT companies have rapidly grown, creating enormous semiconductor demand, and its influence on the global economy is significant, so from the perspective of domestic companies, it is a market they cannot abandon." He added, "Currently, since the U.S. plans have not been concretized, the industry is in a difficult position where it cannot act decisively either way." He further noted, "While continuously expanding investment and exchanges with the U.S., companies must skillfully engage in a tug-of-war between the two countries to avoid losing the Chinese market."
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