hankyoreh

President Biden of the US signs the CHIPS and Science Act into law on the lawn of the White House on Aug. 9. (EPA/Yonhap News)

When the owner of an established manufacturer of memory semiconductors published a book in 2017, he titled it “Semiconductors in the Silicon Age.” That was a reference to the fact that semiconductors — whose primary material is silicon, atomic number 14 — undergirded our information age, just as iron had in the iron age.

The phrase “silicon age” had appeared in a scientific article published much earlier, suggesting that the author of that book may not have originated the term. In response to my inquiry, the Korean Semiconductor Industry Association (KSIA) said the term “silicon age” appeared to have come into use over 10 years ago to express “the gradually increasing use of semiconductors to fulfill all functions in electronic devices.”

That confirms the general sense that semiconductors are a key element in the US and China’s competition for technological hegemony. In addition to those countries, the EU, Japan, Korea and Taiwan have been pouring national resources into their domestic semiconductor industries.

The US’ vision for the so-called Chip 4 — a cooperative body for the semiconductor supply chain that the US hopes to persuade Korea, Taiwan and Japan to join — is gradually coming into being. Given the belief that Chip 4 is part of the US’ strategy of containing China, it has emerged as a geopolitical, economic and national security issue. We seem to have reached the peak of the silicon age.

A law with a very convoluted name took effect in Korea on Aug. 4: the Act on Special Measures Regarding the Protection and Strengthening of Competitiveness of National Cutting-Edge Strategic Industries. While the government abbreviated the name as the “State Cutting-Edge Strategic Industries Act,” it’s better known as the “Special Act on Semiconductors.” In fact, that was the bill’s provisional name when it was first being debated last year.

Last month, the government announced a plan to ease labor and environmental regulations and provide tax relief and infrastructure support (covering electricity and water) for the semiconductor sector. Given the sweeping and unprecedented nature of the plan (as well as the Special Act on Semiconductors itself), there was surprisingly little debate or pushback from Korean society. That’s presumably related to the sharpening competition for technological hegemony over semiconductors and various countries’ rush to put together aid packages.

But the semiconductor issue that has gotten much more attention than those aid packages is Chip 4. This US-backed plan to strengthen cooperation on the semiconductor supply chain with Korea, Japan and Taiwan appears to have been initially proposed by the US back in March. For that reason, analysts believe it’s ultimately aimed at containing China.

The preliminary meeting that’s regarded as the beginning of the discussion about implementing Chip 4 will reportedly be held at the end of August or the beginning of September. Semiconductors are typified by wafer-thin, thumb-sized square chips that hold a complex network of circuits.

In Korea, Chip 4 has been regarded from early on as a “semiconductor alliance” aimed at excluding China, which has prompted concerns that Korean participation would provoke retribution from China on a level with what happened after the deployment of the THAAD missile defense system. Mention has also been made of the US’ deadline of the end of August for Korea’s decision about whether to take part in Chip 4.

“The term ‘alliance’ is a nickname that’s being misused by the press. It’s more appropriate to regard it as a deliberative body or a channel of dialogue for maintaining a stable supply chain,” an official from Korea’s Ministry of Trade, Industry and Energy told the Hankyoreh over the phone.

The official explained that this would add another channel for dialogue in the field of semiconductors, adding to the existing channel between Korean and US industry ministers and the Government/Authorities Meeting on Semiconductors, which is a multilateral deliberative body. The official compared this to the fact that both bilateral and multilateral channels are in place for free trade agreements.

In other words, the official said, Chip 4 represents an attempt not to build fences or walls but to offer more options for major semiconductor producers to stabilize the supply chain.

That’s consistent with what Minister of Trade, Industry and Energy Lee Chang-yang told reporters about Chip 4 on Aug. 8. “We have no intention of setting up a group that is closed or leaves our specific countries, such as China,” Lee remarked.

Was that just pro forma diplomatic rhetoric designed to blunt pushback from China?

Perhaps more than any other globalized industry, the semiconductor sector is one where it’s impossible to “go it alone.” It’s a sector that effectively illustrates the international division of labor, in which countries strive to carve out fiefdoms in each area.

Critical technology is dominated by the US, the parts and materials sector by Japan, memory semiconductor manufacturing technology by Korea, and system semiconductor foundries (the non-memory sector) by Taiwan.

This is an industry in which it’s critical for countries to build a stable supply chain. That’s illustrated by the fact that automotive semiconductors are one of the main areas facing global supply chain disruption.

To wit, Chip 4 cannot be regarded as solely being aimed at containing and excluding China. While China doesn’t occupy a major position in the semiconductor manufacturing supply chain, it does represent the largest market for consumption, which limits the explanatory power of the “wall-building” interpretive framework.

“The US CHIPS and Science Act bans more investment in China, leaving no doubt that it’s intended to contain China. But I’m not sure whether Chip 4 is intended to do the same thing,” said Kim Yang-paeng, an analyst at the Korea Institute for Industrial Economics and Trade (KIET) and a recognized expert on semiconductors.

“It’s not clear where the phrase ‘semiconductor alliance’ originated, nor is it clear what exactly the US has requested of the Korean government. [Chip 4] aims to reinforce a cooperative relationship in semiconductor production,” Kim said.

That suggests that there may not be a big difference between the ostensible and actual goals.

“The focus is not so much on containing China as on laying the groundwork for manufacturing by building [semiconductor] factories in the US. If the goal were to exclude China [from the semiconductor manufacturing supply chain], they would have brought ASML into this,” said Ahn Ki-hyun, executive director of the Korean Semiconductor Industry Association.

Based in the Netherlands, ASML is a semiconductor equipment supplier that’s thought to wield unusual influence because of its indispensable position in the industry.

“China could be contained as long as ASML and Japan [which controls the parts and materials sector] were brought onboard. That’s already underway, and laws are in place to regulate China,” Ahn added.

The KIET raised eyebrows when it selected Taiwan as the keyword of the Chip 4 initiative in a report published last month titled “Changes in Semiconductor Geopolitics and Korea’s Course.” According to this analysis, the US and other Western countries’ key long-term goal is to ultimately acquire a domestic manufacturing base for system semiconductors so they can reduce their overdependence on Taiwan, given its geopolitical instability.

The KIET report, which is based on various governments’ semiconductor aid packages and major figures’ remarks, departs from the simplistic tendency to regard Chip 4 as a semiconductor alliance. If the report’s analysis is correct, the key challenge is not retribution from China, but the feasibility of gradually relocating the base of semiconductor manufacturing.

By Kim Young-bae, senior staff writer

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