US Tightens Grip on Chinese Semiconductors: "Korea Must Secure Real Benefits from Fab4"

From Early Year, US Pushes Export Sanctions Against China
South Korea in Fab4 Sight... "Avoid Vague Concerns"

[Asia Economy Reporter Kim Pyeonghwa] The United States is pressuring Japan and the Netherlands, which host major semiconductor equipment companies, to join in restricting semiconductor exports to China. Japan and the Netherlands appear hesitant as their domestic companies' profits could be affected. However, the U.S. is expected to continue demanding participation from these countries to enhance the effectiveness of sanctions against China. In South Korea, concerns have arisen that domestic companies' earnings from China might decrease following the country's participation in FAB4 (the semiconductor supply chain alliance of the U.S., South Korea, Japan, and Taiwan) this year. Experts advise focusing on the potential benefits rather than worrying vaguely, given the difficulty in assessing the gains and losses from joining FAB4.

On the 17th (local time), U.S. President Joe Biden met with Dutch Prime Minister Mark Rutte, who was visiting the United States, at the White House. During their summit, the two leaders discussed measures to control semiconductor exports to China. The U.S. is regulating the export of equipment necessary for advanced semiconductor manufacturing to China. It is believed that the U.S. naturally requested the Netherlands to join these efforts. Earlier, on the 13th (local time), President Biden met with Japanese Prime Minister Fumio Kishida at the White House and conveyed the same message.

The reason for requesting Japan and the Netherlands to join the China sanctions lies in the characteristics of the semiconductor equipment market. Alongside U.S. companies Applied Materials, Lam Research, and KLA, Japan's Tokyo Electron and the Netherlands' ASML are among the world's top five equipment manufacturers, accounting for about 80% of the global market. Previously, in October last year, the U.S. blocked semiconductor equipment exports to China used for producing 18-nanometer (nm; 1 nm is one billionth of a meter) DRAM, 128-layer or higher NAND, and logic semiconductors of 14 nm or less.

Japan and the Netherlands have shown reluctance toward the U.S. proposal, as their domestic semiconductor equipment companies could see reduced profits from China. Dutch Minister of Trade Liesje Schreinemacher expressed a negative stance to local media before the bilateral talks, stating, "It should not be assumed that we will sign the (U.S.) proposal." However, to strengthen pressure on China as intended by the U.S., participation from Japan and the Netherlands is essential. The U.S. is expected to continue pressuring both countries to join.

As the U.S. increases pressure on China from the new year, interest in FAB4 is rising domestically. FAB4 is a semiconductor supply chain alliance proposed by the U.S. and is considered another card in the U.S.'s China sanctions strategy. South Korea received the FAB4 proposal last year and has been discussing it, with plans to actively participate this year. The Ministry of Foreign Affairs and the Ministry of Trade, Industry and Energy announced participation in FAB4 in their new year work reports.

However, concerns have been raised due to the significant proportion of China's business in South Korea's semiconductor industry. There is a risk that domestic companies' profits in the Chinese market could decline. Nonetheless, the specific purpose and implementation details of FAB4 have not been concretely established. This is why experts advise focusing on the benefits that domestic companies can gain by participating in FAB4.

Professor Choi Pil-su of Sejong University's Department of China Trade said, "FAB4 literally means participating in a fabrication alliance, so there is no need to overinterpret it as joining an alliance." He added, "At this stage, the substance is unclear." He also explained, "China has a semiconductor market, but since the U.S. possesses both the market and technology, it is natural to participate."