Fears of Chinese retaliation and regional tensions are hampering US efforts to rally its East Asian allies behind a proposed semiconductor supply chain alliance.
The so-called “4-chip” initiative is part of the US strategy to enhance its access to critical chips and weaken Chinese involvement, on trade and national security grounds.
It is meant to include the United States, South Korea, Japan and Taiwan, and provides a forum for governments and companies to discuss and coordinate policies related to supply chain security, workforce development, research and development, and subsidies.
But a year after the plans were first drawn up, the four countries have not yet finalized plans to even hold a preliminary meeting. Concerns include China’s possible reaction, reluctance to include Taiwan in an intergovernmental forum, and long-standing tensions between South Korea and Japan.
Sugai Shivakumar, a senior fellow at the Center for Strategic and International Studies in Washington, said the US “needs alliances to shore up its supply chain”, and “to give it breathing space” to recapitalize its industrial base in the sector. He added that the Chip 4 initiative was also designed “in part to slow China’s progress.” [on chips]”.
The US is promoting the initiative as a positive multilateral agenda entirely separate from the export controls and investment vetting it has imposed to make it difficult for China to obtain advanced semiconductor technology.
But in July, Chinese Ministry of Commerce spokeswoman Xu Jueteng warned that the United States was “harming and dividing” the global semiconductor supply chain through the Chips 4 alliance, which she said could exacerbate supply chain problems if it were “discriminatory and exclusivist.” “.
Opposition to China, which accounts for 40 percent of global IT production and remains an important source of key components and materials, has alarmed many regional governments and chip makers.
Kyung Ki-Hyun, head of Samsung Electronics’ semiconductor division, said last week that Samsung had “communicated our concerns” about the initiative to the South Korean government.
“Our position is that for the Chips 4 alliance, they should seek understanding from China first and then negotiate with the United States,” Keung said. “We are not trying to exploit the conflict between the United States and China, but we are trying to find a win-win solution.”
South Korea’s Samsung and SK Hynix are global leaders in memory chips, Taiwan’s TSMC dominates the non-memory sector, and Japan is home to some of the world’s leading semiconductor material producers and equipment makers.
A US government official said South Korea, the most frequented among potential members of the alliance, had expressed concerns that the initiative “would interfere with the competitive balance between some of the big chip companies,” for example by asking competitors like Samsung and TSMC to share technology with each other. some.
Some in Korea also worry that Washington will be tempted to use the initiative to give US rivals Intel and Micron a competitive advantage.
Lee Jong-ho, South Korea’s Minister of Science and Information and Communication Technology and a renowned semiconductor expert, said that China had “already become a tough market to do business and bring in new equipment even before the alliance proposal.”
But he said it was important to respect the opinions of private companies, adding that “it is not appropriate to consider this a crisis.”
Park Ji-jun, professor of electronics engineering at Hanyang University, said that South Korea “should assure China that it has no choice but to join due to US pressure, and that it cannot produce memory chips in China without joining the alliance.”
But a Japanese government official said that if South Korea joined, it could limit the scope of the initiative, given the unresolved tensions between the two countries. Japan has yet to lift chemical export controls to the Korean semiconductor industry that were imposed in 2019 amid a dispute over historical issues.
Sana Takeichi, the new Minister of Economic Security, stressed the importance of Japan working with the United States and other nearby countries to make its semiconductor supply chain resilient. But she added, “It is also important, however, to keep in mind that efforts in economic security do not constrain business activities and harm innovation or efficiency,”
Japan and Korea have also demonstrated their unwillingness to engage at the governmental level with an official grouping that includes Taiwan.
A senior Korean official said South Korea has sought assurances from the United States that Taiwan’s participation cannot be interpreted by Beijing as a challenge to the one-China policy.
The Korean official added that South Korea has not made any commitments other than attending the future “preliminary meeting” of the four countries.
But the US official said Seoul has now made the de facto decision to join: “They don’t want to be left or left, and frankly it will be difficult to move forward without them.”
The slow progress of the initiative has shown that “a multilateral approach only works if everyone has the same desire to act at the exact same time,” said Nasak Nikakhtar, now a senior US economic security official at the Washington law firm Wiley Ryan.
“South Korea is not as advanced as the United States or Japan on the China issue — they are worried about North Korea, their proximity to China, etc.,” Nyktar said.
“We also cannot expect Taiwan to self-regulate trade with China, because a lot of the raw materials they use to make chips come from China,” she added. “So the idea that you can get Taiwan and South Korea in particular to move in full swing with us on this is absurd.”
Additional reporting by Eleanor Olcott in Hong Kong