Weathering the war on the chip front

If Korea lose its chip leverage, the country has no future. The government must make diplomatic effort to minimize economic losses.

After the United States launched a war to redraw the global chip map, Korea’s chip industry is also reshaping. The U.S. is ratcheting up tension with China after translating its move toward semiconductor independence as a security threat. The problem is that Korea cannot but be affected in the course of the battle between the U.S. and China.

The Group of Seven summit in Hiroshima on Sunday exposed the real facet of a deepening chip war between the countries. A joint statement from leaders of the G7 contains detailed action plans to pressure China regardless of their different national interests. The U.S. praised the statement for reflecting unprecedented coordination among allies. Some of them cautiously called it a move for “derisking” not “decoupling.” And yet they manifested determination to take joint action against China.

The G7 leaders also agreed to set up new platforms to confront China’s unfair practices — such as economic retaliation and weaponization of rare earth materials — and establish partnerships to secure stable supply chains for chips and secondary batteries. They also underscored the need to regulate cutting-edge technologies that can be used to help modernize the Chinese military.

Shortly after the announcement of the joint statement, the Chinese government stopped local companies from buying chips from Micron, a U.S. company. That was China’s first sanction on the U.S. since the start of the chip war. Could Korean chipmakers replace the demand for chips in China? According to a Financial Times report in April, the Biden administration demanded that Korea not fill the gap if China stops purchasing U.S. chips. The request can help China raise the share of its own chips in the domestic market rather than help Korea reap gains temporarily.

Revitalization of the Japanese chip industry is also alarming. After the 1986 U.S.-Japan Semiconductor Agreement, Japan lost its global chip power. But the chip industry is rapidly rebounding thanks to Tokyo’s support. On May 18, a day before the G7 summit, Japanese Prime Minister Fumio Kishida invited global chipmakers to a meeting and drew promises to invest in Japan from three big names. Micron plans to manufacture next generation D-RAMs in Japan after pouring in 5 trillion won ($3.8 billion) while Samsung Electronics and Taiwan’s TSMC pledged to expand their investments.

Semiconductors are the backbone of our economy. If Korea lose its chip leverage, the country has no future. The government must make diplomatic effort to minimize economic losses.