July 21, 2022
SEOUL – Amid pressure building on South Korea to join a US-led chip alliance that strategically isolates China from the global semiconductor supply chain, Science Minister Lee Jong-ho on Wednesday said in rare remarks that the government should be careful in making such a decision, citing its impact on other industries.
“I have talked to business executives who have been to China. It’s difficult to talk about the details, as it is an ongoing matter, but we have to make a decision that will benefit the country,” Lee said in his first sit-down with the press.
“Although Fab 4 is restricted to the semiconductor sector, it can have an impact on other industries. So we have to be cautious,” Lee said, referring to the US-led semiconductor supply chain alliance called “Chip 4,” which is also known as “Fab 4.” The alliance is comprised of four global semiconductor powerhouses including Japan and Taiwan.
The science minister added that Korea must cool-headedly consider what would be helpful for the country if it joins the US-led chip alliance and decide on the matter.
The US government has recently asked Korean officials to respond to its invitation to join the chip alliance by the end of August, according to diplomatic sources.
The science minister’s remarks come as tensions between the US and China have risen over Washington’s collective efforts to keep Beijing in check.
The US Senate earlier passed legislation to provide billions of dollars in subsidies and tax credits for the semiconductor industry. According to reports, the support measures include $54 billion in subsidies and a four-year 25 percent tax credit to encourage companies to build plants in the US.
The bill also includes a provision that would prohibit companies that receive US government assistance from expanding manufacturing capacity in China for the next 10 years, according to reports.
China has openly criticized Washington’s moves, and has warned countries against joining the Chip 4 alliance.
“The US always claims itself to be a champion of free trade, but has again abused its state power to politicize, instrumentalize and weaponize sci-tech and business issues,” said Zhao Lijian, spokesperson at the Chinese Foreign Ministry, in a briefing Tuesday.
“We hope relevant parties will stay objective and fair, approach issues in light of their own long-term interests and the market principles of fairness and equity,” Zhao said. He added that the Chinese Foreign Ministry also hopes that relevant parties will do more “to (stabilize) the global chip industrial and supply chains.”
Some experts say that South Korea may face retaliation from China if it joins the US-led chip alliance, directly hitting domestic exporters of consumer goods.
“The most vulnerable sectors are consumer goods that experience damage during the THAAD (Terminal High Altitude Area Defense) conflict. They include retail, cosmetics and ramyeon (Korean instant noodles) industries,” said Yang Jun-sok, economics professor at the Catholic University of Korea.
Others warned of Beijing’s unpredictable reprisals, which could hit any sector.
“When you look at how China has acted in the past, if Korea joins the chip alliance, there could be indiscriminate retaliation rather than a logical one with a causal relationship,” said Kim Young-han, an economics professor at Sungkyunkwan University.
A semiconductor industry official told The Korea Herald that Korean chipmakers are also watching the situation closely, as both the US and Chinese markets are crucial sectors for Korean chip makers.
“With Korean-made semiconductors being widely used in China, it remains questionable whether Beijing could impose sanctions (if Korea joins the US-led alliance),” said the official.