[The Editors' Verdict] National Interest Before the Chip4 Alliance

Companies Fear a Second THAAD Crisis
Using Powerful Semiconductor Weapons as a Stepping Stone
Must Find a Balance Point Between the US and China

[Asia Economy Lee Cho-hee, Head of Industry Department] Once again, the ‘time of choice’ has come. This time, it is the G2 sandwich. The deadline to decide whether to participate in the ‘Chip4 (Chip4: Korea, United States, Japan, Taiwan)’ initiative led by the U.S. is approaching. Chip4 is a semiconductor supply chain alliance proposed by the U.S. to Korea, Japan, Taiwan, and others. It is a strategy to control the supply chain by uniting the four countries dominating the global semiconductor market. It reflects an intention to expand the anti-China front in the semiconductor sector, which is a core of economic security, to isolate China. Simply put, it is about taking sides and ostracizing China.

China, which has declared its ambition for ‘semiconductor rise,’ will not remain passive. It has openly threatened economic retaliation, calling joining the Chip4 alliance ‘commercial suicide’ as it excludes the Chinese market. The South Korean government finds itself in a difficult position. There is a plausible interpretation that President Yoon Suk-yeol’s avoidance of a meeting with U.S. House Speaker Nancy Pelosi, who visited Korea via Taiwan last week despite controversy over cold treatment, was due to caution toward China.

We have already experienced this. The aftermath of the 2016 THAAD (Terminal High Altitude Area Defense) crisis on the Korean Peninsula was severe. At that time, the Moon Jae-in administration adopted ‘strategic ambiguity’ between the security alliance with the U.S. and the economic alliance with China (Anmi-Gyeongjung). China immediately launched economic retaliation with meticulous methods. The damage to Korean companies exceeded expectations. Some companies, including Lotte Group, were almost expelled from China due to the backlash. This fear underlies concerns that joining the Chip4 alliance could become a ‘second THAAD.’

Of course, the circumstances now are markedly different from those during the THAAD incident. Semiconductors are China’s Achilles’ heel. The dependence on foreign companies, including Korea’s, is absolute. If products from Samsung Electronics and SK Hynix are excluded, China’s IT industry would come to a halt.

It is no longer possible to insist on ‘Anmi-Gyeongjung’ as during the THAAD period. The U.S. has established military-security cooperation such as QUAD (U.S., Japan, India, Australia), AUKUS (U.S., U.K., Australia), and the trilateral cooperation among Korea, the U.S., and Japan; in trade, the Indo-Pacific Economic Framework (IPEF); and in technology, the Chip4 semiconductor alliance.

Especially since the inauguration of the Joe Biden administration, there has been a strong demand to side with the U.S. in the semiconductor, battery, and display sectors. Since the Age of Exploration, the world has balanced shortages and surpluses through trade. Even through the Industrial Revolution and the First and Second World Wars, this rule has never been broken. What the U.S. is attempting is a radical idea to artificially reshape this international order.

The North Atlantic Treaty Organization (NATO) was created as a military alliance of Western Europe to block the westward expansion of the Soviet Union. In response, the pro-Soviet camp formed the Warsaw Treaty Organization (WTO). Both were military alliances. The Chip4 alliance led by the U.S. is a technological alliance but carries political and security alliance characteristics similar to NATO or the Warsaw Pact. That is why it is a difficult and intimidating proposal to refuse.

The U.S. holds the original semiconductor technology. Leaving the technology alliance led by the U.S. is tantamount to giving up the semiconductor industry. However, it is also impossible to exclude China, which dominates key raw material markets such as secondary batteries and is the largest trading partner. Samsung Electronics and SK Hynix also have semiconductor production lines in China.

Korea holds a powerful weapon called semiconductors, known as the rice of modern industry. Although caught in a G2 sandwich, we have sufficient qualifications to raise our voice. At a time when neither the U.S. nor China can be abandoned, balanced diplomacy is more important than ever.