Chip powerhouse S. Korea struggles to strike balance between China’s demands, US pressure

Posted on : 2023-06-01 16:51 KST Modified on : 2023-06-01 16:51 KST
The South Korean government has not yet come out with a clear position on the issue
Graphic by Jang Eun-yeong.
Graphic by Jang Eun-yeong.

Trade officials from South Korea, the US, and China discussed areas of mutual interest in South Korea-China and US-China meetings coinciding with an Asia-Pacific Economic Cooperation (APEC) trade ministers’ meeting held in Detroit on May 25 and 26.

While the ministers discussed key issues such as semiconductors, global supply chains, and raw materials, the results only confirmed their differences rather than moving them toward cooperation.

During a meeting of the US and Chinese commerce ministers on May 25, US Secretary of Commerce Gina Raimondo “raised concerns about the recent spate of PRC actions taken against US companies operating in the PRC,” the Commerce Department reported in a readout.

This appeared to be an expression of disgruntlement over Chinese authorities’ decision on May 21 to restrict sales of products by the US semiconductor company Micron Technology, citing the discovery of “significant security risks.”

The Chinese Ministry of Commerce reported that Minister Wang Wentao had expressed concerns about US economic and trade policies targeting China, as well as semiconductor policies, export controls, and reviews on overseas investment. This suggests China was pushing back against the export controls imposed by the US administration last October, which effectively banned exports of advanced US semiconductors and equipment to China.

While the latest meeting between the US and China commerce ministers was significant as the two sides’ first ministerial-level meeting in Washington since the Joe Biden administration took office in January 2021, the end result only reaffirmed the differences between them.

In another meeting the following day between Wang and US Trade Representative Katherine Tai, the US raised issues with China over the “critical imbalances caused by China’s state-led, non-market approach to the economy and trade policy,” while China voiced concerns over key issues such as “US policies on economy and trade with China, Taiwan-related issues in the economic and trade sector, the ‘Indo-Pacific Economic Framework’ and the Section 301 tariffs.”

South Korean and Chinese trade officials also showed different stances on semiconductor issues during their meeting.

After a meeting Friday between Wang and South Korean Trade Minister Ahn Duk-geun, the Chinese Commerce Ministry reported that the two sides had agreed to pursue stronger dialogue and cooperation on the areas of semiconductor industry networks and supply chains.

But while that report singled out semiconductors as an area where the two sides had agreed to pursue cooperation, the same content was not included in the South Korean announcement. This suggests a strong likelihood that China pushed for cooperation in the semiconductor sector during the meeting, and that South Korea responded with generalities.

Meanwhile, the South Korean Ministry of Trade, Industry and Energy (MOTIE) reported that Ahn had asked China for “attention and assistance to ensure smooth trade functioning and stable supplies of key raw materials and components,” along with “cooperation to establish a predictable trade environment for companies receiving South Korean investment in China.” In return for semiconductor-related issues, South Korea was emphasizing the need for stable supplies of raw materials and components imported from China.

At a time of growing tensions between Washington and Beijing over Chinese authorities’ recent move to sanction the US semiconductor company Micron, China has expressed its hope for cooperation from South Korea, while the US has criticized China’s sanctions and sent the message to Seoul that it should not cooperate with Beijing.

The South Korean government has not yet come out with a clear position on the issue.

The MOTIE also reported that a meeting the same day between Ahn and Tai as representatives of South Korea and the US included discussions on plans for coordinating on major trade issues to promote economic partnership and high-tech industries on both sides.

But South Korea’s issues received short shrift in the meeting with the US. The MOTIE explained that “Indo-Pacific Economic Framework negotiations and residual Inflation Reduction Act (IRA) issues” were discussed in the meeting with Tai — but it made no mention of the semiconductor-related issues, which have been the biggest actual focus.

Seoul faces the task of having to get the US to recognize exceptions to its ban on advanced semiconductor technology and equipment exports to China by October of this year, while loosening measures restricting production capabilities for Chinese semiconductor plants.

It’s a life-or-death matter for Chinese semiconductor factories that have received around 70 trillion won in investment from Samsung Electronics and SK Hynix — but for nearly a year, the South Korean government has merely said that the issue was being “discussed closely.”

South Korean semiconductor industry insiders have contended that Seoul is merely “watching for cues” without making full use of its leverage as a global memory semiconductor giant.

By Choi Hyun-june, Beijing correspondent; Kim Hoe-seung, senior staff writer

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