[Trapped in the Chinese Economy]⑧ "China's Semiconductor Independence Is a Matter of Time... Rapidly Catching Up"

"China has not yet achieved significant results in semiconductor design and production, but in the mid to long term, it will be able to acquire its own technology. Our country must strengthen technological capabilities through continuous research and development, investment, and innovative ideas, and maintain a super-gap in future strategic industries."

Seo Haeng-ah, Director of the Korea-China Science and Technology Cooperation Center, explained in an interview conducted via written correspondence and phone with Asia Economy on the 3rd that China's competitiveness in advanced technologies such as semiconductors will rapidly grow. Although it still lags significantly behind Korea and the United States, the massive investment by the Chinese government and large-scale fundraising through initial public offerings (IPOs) can quickly narrow that gap. There is also analysis that China's market competitiveness in NAND flash and other areas will catch up with ours within a few years.

He emphasized that rather than making extreme choices between the U.S. and China, a 'pragmatic' strategy should be pursued, and independent technology development is paramount. Director Seo said, "We need to maintain the initial technological gap in the memory sector while strengthening the system semiconductor ecosystem," and "In terms of dependence on imported materials, we should participate in regional cooperation mechanisms to secure supply chains that can replace China."

Director Seo is regarded as an expert in the science and technology fields of Korea and China. Since 1995, he has worked at the Korea Institute of S&T Evaluation and Planning (KISTEP), mainly researching Chinese science and technology policies. Since 2021, he has served as the director of the Korea-China Science and Technology Cooperation Center under the Ministry of Science and ICT, working on international cooperation and network building in science and technology in China.

Seo Haeng-ah, Director of the Korea-China Science and Technology Cooperation Center

-The U.S. is strengthening regulations on advanced technology industries targeting China. To what extent is this effective in blocking China's technological development and growth?

▲China is making great efforts to respond to the U.S.-China technological hegemony competition but has not yet achieved significant results in independent semiconductor design and production. The Dutch semiconductor equipment company ASML has blocked exports of cutting-edge extreme ultraviolet (EUV) lithography equipment, preventing China from obtaining semiconductors for 5G, which has led to Huawei losing competitiveness in the global smartphone and telecommunications equipment markets. However, as the share of local companies in China's semiconductor equipment market is expected to increase steadily, China's semiconductor technology development is only a matter of time.

-Semiconductors are a core area in the U.S.-China hegemony struggle. Given ongoing U.S. regulations, do you think China can achieve semiconductor localization?

▲China still shows a significant gap compared to the U.S. and others in memory DRAM, but NAND flash is expected to become competitive in the market within a few years. NAND flash has about a 2-year technology gap, and DRAM and foundry about 5 years. China holds competitiveness in AI semiconductors and mid-to-low-end semiconductors within system semiconductors, and invests more in EDA (Electronic Design Automation) software than Korea, so it is expected to rapidly catch up with Korea.

Especially, due to the U.S.-China hegemony struggle, China's massive investment and IPOs in the semiconductor industry have become a major driving force for China's semiconductor development. Among 51 semiconductor companies listed from 2012 to 2021, 43 companies have raised large-scale funds through the STAR Market (China's Nasdaq equivalent), and Hua Hong Foundry plans to raise 21.2 billion yuan soon through a STAR Market IPO.

-Morris Chang, founder of TSMC, said, "China cannot win the recent U.S.-China semiconductor war." What is your view?

▲The core talents leading China's technological development are highly skilled technicians educated abroad. Many Chinese students and high-level technicians are active worldwide. The Chinese government is implementing active policies to attract such talent, further strengthening its semiconductor technology development. The alliance of 'Chip 4' countries may slow China's technology development speed, but China is expected to continue pursuing and catching up. Recently, CEOs of global companies from the U.S. and Europe, such as Elon Musk, Bill Gates, and Tim Cook, have visited China consecutively, showing strong determination not to give up on the Chinese market.

-Both the U.S. and China are striving to increase semiconductor self-reliance. What efforts should we make to strengthen semiconductor competitiveness?

▲We need to maintain the initial technological gap in the memory sector while strengthening the system semiconductor ecosystem. Korea requires a strategy to enhance technological capabilities through continuous research and development, investment, and innovative ideas, and to maintain a super-gap in future strategic industries.

-Currently, in which technological fields does China have strengths compared to the U.S., and in which does it not?

▲China has emerged as the biggest competitor to the U.S. in 21st-century foundational technologies such as artificial intelligence (AI), 5G, quantum information, semiconductors, biotechnology, and green energy. Among these, China has surpassed the U.S. in specific areas of quantum information science, including quantum computing, quantum communication, and quantum sensing. In the 5G field, China has surpassed the U.S. in the number of users and base stations, regardless of technology. Also, China's investment in quantum information R&D is four times that of the U.S. However, in most technologies such as medical, computing, material chemistry, pharmaceutical manufacturing, and transportation technology, China remains highly dependent on the U.S. Therefore, China is expected to further strengthen open innovation and greatly encourage investments with companies from Japan and Germany to replace the U.S.

-There is much analysis that except for some areas like semiconductors, Korea's technological capabilities lag behind those of the U.S. or China. How do you evaluate this?

▲Looking at last year's secondary battery market share, China's CATL holds 34%, while Korea's LG Energy Solution holds 14%, showing a large gap. China has formed a complete battery industry system covering research and development, production, recycling, equipment, and materials, achieving nearly 90% localization in processes and core equipment. In new technology fields such as AI chips, automotive chips, and biochips, Korea is often evaluated as lacking independent technological superiority.

-How should we respond amid the U.S.-China advanced technology hegemony struggle?

▲China is Korea's largest export market, so maintaining continuous cooperative relations is necessary. Even if China builds its own supply chain as the largest export country in the semiconductor field, it seems impossible for us to completely break away from the supply chain with China. In the mid to long term, we need to carefully analyze supply chains in future strategic industries and participate in regional cooperation mechanisms such as the Regional Comprehensive Economic Partnership (RCEP) to secure supply chains that can replace China.

-How do you see the conclusion of the U.S.-China struggle over advanced technology fields?

▲Even if the U.S. continues semiconductor sanctions against China, China will be able to acquire its own technology in the mid to long term, so it is expected that consultations on advanced technology fields between the two countries will take place. Jensen Huang, CEO of Nvidia, mentioned that if China cannot buy semiconductors from the U.S., it will "make them by itself." In fact, Nvidia is producing and supplying a lower-performance 'H800' model for the Chinese market under the U.S. government's high-performance semiconductor export control measures to China.

-What opportunities and risks do Korean companies face in the U.S.-China advanced technology hegemony struggle?

▲As the technological gap between Korea and China continues, it can be an opportunity for domestic semiconductor companies, but there are many restrictions on domestic companies' market development in China and on industry-academia-research science and technology cooperation. Rather than making extreme choices, a strategy prioritizing 'pragmatism' is required, with foresight looking 100 years ahead. Continuous industry-academia-research science and technology cooperation with China should be pursued, and government-level diplomatic response roles should be strengthened.