‘Semiconductor Dilemma’ of Yoon Administration... Likely to Delay Clear Commitment to ‘Chip4’

Government Deliberates on Joining 'Chip 4'... US-Led 'Semiconductor Alliance'
China's 'Tech Rise' Suppression Goal... Supply Chain Reorganization Centered on Allies
Potential Korea-China Trade Friction... Korea's Semiconductor Exports Account for 40%
Trade Chief: "No Deadline for Joining... No Response Expected Until Next Month"

President Yoon Seok-yeol Examining a Photomask
(Seoul=Yonhap News) President Yoon Seok-yeol is looking at a semiconductor photomask received from Minister Lee Jong-ho of the Ministry of Science and ICT during a Cabinet meeting held at the Yongsan Presidential Office building in Seoul on June 7, 2022. 2022.6.7 [Provided by the Presidential Office. Redistribution and DB prohibited]
Photo by Jeong@yna.co.kr
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＜Copyright(c) Yonhap News Agency, Unauthorized reproduction and redistribution prohibited＞

[Asia Economy Sejong=Reporter Lee Jun-hyung] The government is caught in a 'semiconductor dilemma' between the United States and China. This comes as the U.S. demands South Korea join the semiconductor alliance 'Chip4,' which excludes China. Since the government has emphasized that there is no 'deadline' for joining Chip4, it is expected to delay giving a definite answer to the U.S. side.

According to related ministries on the 30th, the government is deliberating over joining Chip4. Chip4 is a semiconductor alliance composed of four countries: the U.S., South Korea, Japan, and Taiwan. The 'Chip' in Chip4 stands for semiconductors, and '4' represents the number of allied countries. Earlier, the U.S. officially proposed the formation of the Chip4 alliance to South Korea in March. On the 29th, Minister of Trade, Industry and Energy Lee Chang-yang said during a report to the National Assembly's Industry, Trade, Resources, Small and Medium Enterprises Committee, "The specific details of Chip4 have not been decided, and the agenda has not been set, so it is not possible to directly assess the impact," adding, "(However) overall, we are discussing what cooperation and strategies are necessary to enhance the competitiveness of South Korea's semiconductor industry amid the international situation."

US and South Korean Leaders Inspect Samsung Electronics Semiconductor Factory
(Pyeongtaek=Yonhap News) Reporter Jeong Won Ahn = U.S. President Joe Biden, visiting South Korea for the first time since his inauguration, visited the Samsung Electronics semiconductor factory in Pyeongtaek, Gyeonggi Province, on the afternoon of May 20th with South Korean President Yoon Suk-yeol to inspect the facility. From the left are Gina Raimondo, U.S. Secretary of Commerce, President Biden, and President Yoon Suk-yeol. Second from the right is Lee Jae-yong, Vice Chairman of Samsung Electronics.
jeong@yna.co.kr
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＜Copyright(c) Yonhap News Agency, Unauthorized reproduction and redistribution prohibited＞

China's 'Semiconductor Rise' Check... Government's Concerns Deepen

The issue is that the core of Chip4 lies in containing China. Chip4 embodies the U.S. intention to reorganize the global semiconductor supply chain centered on allied countries to suppress China's 'technological rise.' This is why the U.S. chose South Korea, strong in memory semiconductors, Taiwan, the strongest in non-memory semiconductors, and Japan, which has world-class competitiveness in materials, parts, and equipment (MPE) sectors, as Chip4 allies.

China has already warned against South Korea joining Chip4. Zhao Lijian, spokesperson for the Chinese Ministry of Foreign Affairs, recently stated at a regular briefing, "In a world economy deeply integrated, the behavior of the U.S. side (such as Chip4) goes against the trend," and "It will inevitably fail as it does not gain public support." Zhao also said, "Looking only at 'chip trade,' 60% of South Korea's exports last year went to the Chinese market." This is interpreted as an indirect opposition to South Korea's joining Chip4 by emphasizing that China is South Korea's largest trading partner.

Accordingly, the government is repeatedly deliberating. Since China has openly criticized the U.S.'s 'semiconductor alliance' plan, South Korea's joining Chip4 could directly lead to trade friction between South Korea and China. China is the largest demand market, accounting for about 40% of South Korea's semiconductor exports, so if trade friction arises, the domestic semiconductor industry will inevitably suffer immediate damage. There is also a possibility that China's backlash could escalate into large-scale economic retaliation similar to the THAAD incident. The inclusion of Taiwan, which China does not recognize as a state, in Chip4 also adds to the government's concerns.

First Chip4 Meeting Next Month... Government Says "No Deadline"

The U.S. has ultimately notified South Korea of a 'deadline' to hold the first Chip4 working-level meeting at the end of next month. Unlike Japan and Taiwan, which have shown positive responses to Chip4 early on, South Korea has yet to express any position. Considering that the meeting schedule was not coordinated with South Korea in advance, the U.S. is effectively demanding a definite answer.

However, the government emphasized that the schedule set by the U.S. is not a 'deadline.' On the 28th, Ahn Deok-geun, Director-General for Trade Negotiations at the Ministry of Trade, Industry and Energy, said at a briefing, "As far as I know, there is no deadline for joining (Chip4)," adding, "The U.S. side has not set a deadline to force a conclusion." A Foreign Ministry official also recently said, "It is hard to call it a (U.S.) joining proposal," and "It is difficult to positively acknowledge that there is only about a month left for a response."

There is also analysis that the government is likely not to decide on joining Chip4 by next month. The government is currently promoting economic cooperation projects with China to mark the 30th anniversary of diplomatic relations between South Korea and China on the 24th of next month. In this situation, deciding to join Chip4 next month could disrupt the Korea-China economic cooperation projects. Director-General Ahn said, "The biggest goal of the Trade Negotiations Office is to stabilize industrial and trade relations with China," and "I think there will be no response regarding Chip4 until the end of next month."