SEOUL ‘WILL NOT GAIN’ FROM CHIP MAKER BAN
Source says South Korea will avoid cashing in on Beijing’s Micron decision, viewing measure as attempt to weaken its relationship with the US
South Korea will avoid capitalising on China’s ban of a US chip maker, seeing the move by Beijing as an attempt to drive a wedge between Seoul and Washington, according to a person familiar with the situation.
The South Korean government would not encourage its memory-chip firms to grab market share in China lost by Micron Technology, which had been barred for use in critical industries by Beijing on national security grounds, said the person, who asked not to be identified as the topic was politically sensitive.
China is the biggest market for South Korea semiconductor firms Samsung Electronics and SK Hynix and home to some of their factories.
Their continued operations in China are dependent on licences granted by Washington, giving the United States some leverage over Seoul’s decisions on how it balances its economic engagement with both countries.
South Korea was also wary of taking advantage of the Micron situation as it saw the US as a key long-term partner for its semiconductor industry and did not want to disrupt that relationship, said the person.
Beijing’s Micron decision has drawn South Korea into the US-China battle over technology access and national security. While Washington is Seoul’s top security partner, China is South Korea’s biggest trade partner.
Washington, along with allies in Japan and the Netherlands, has imposed a series of export controls on chipmaking equipment and know-how to Beijing as the world’s top two economic powers increasingly square off in trade and technology.
“A broader ban of Micron semiconductors puts South Korea in the worst of both worlds,” said Troy Stangarone, senior director at the Korea Economic Institute (KEI).
If South Korean companies did not help with filling the gap left by Micron, China might penalise them the way it did for Seoul’s previous decision to deploy on its soil a US anti-missile defence system, known as THAAD, he said.
The Financial Times reported earlier this month that South Korea signalled it would allow its companies to fill the gap left by China’s Micron ban. The government in Seoul denied that, saying it had yet to announce any formal position.
It remains unclear whether China would expand its crackdown on US chip makers or how Washington will respond to Beijing’s ruling on Micron. The two sides have recently tried to lower tensions and restore highlevel talks, including meetings last week between top commerce officials in Washington.
In a briefing on Saturday, US Commerce Secretary Gina Raimondo said the US was speaking to allies about China’s ban on Micron, which had said the country accounted for about 11 per cent of its revenue.
A broader ban of Micron [chips] puts South Korea in the worst of both worlds
TROY STANGARONE OF THE KEI
“We see it as plain and simple economic coercion,” she said. “And we won’t tolerate it.”
China’s commerce ministry said after talks with South Korea amid the Asia-Pacific Economic Cooperation forum in Detroit last week that the sides had agreed to strengthen cooperation on semiconductor supply chains.
A separate statement from the South Korean trade ministry made no reference to chips and instead said they discussed cooperation on stabilising critical commodities and components.
China has moved to impose a ban on American chip maker Micron Technology’s products. While it marks a significant retaliation, it’s remarkably measured when compared to a long list of export controls and tech sanctions imposed by the United States. It is ironic Washington is now accusing Beijing of not keeping its word about openness, in light of what many observers have termed its “chip war” against China. So far, this US tech war has been one-sided. But the Micron ban shows that Beijing means business. In an official statement, the Cyberspace Administration of China complained that its products posed “serious network security risks to critical information infrastructure supply chain” and therefore “national security”.
Micron stands to lose its 28 per cent lock on the Chinese market share of DRAM memory chips – which are used in all types of electronics from smartphones to computers – behind Samsung’s 43 per cent. The move against the semiconductor giant, which may well see it eventually ejected from the Chinese market, involves particular bad blood. China has been looking for suitable targets. Micron is almost the lone big chip player in the US to have not only launched multiple intellectual property lawsuits but also frequently lobbied Washington against China. By doing so, Micron bosses calculated that it could expand its sales dominance in China while deterring Chinese firms from developing their own chip-making capabilities.
In the past five years, records show that Micron has lobbied the US government at least 170 times to raise questions about China’s competition. Some Chinese memory chip makers put on Washington’s blacklist are either direct or potential competitors of Micron. Such tactics have backfired. The Joe Biden White House has reportedly pressured the Korean government and Samsung not to try to fill the supply gap left by Micron. Some top US politicians have threatened retaliation. It’s unclear whether the Koreans will cave in to the American demand. But domestic Chinese chip suppliers are already stepping up. Companies such as Yangtze Memory Technologies Corp, the largest memory-chip maker, have made great strides. It has been testing locally made equipment and is confident enough to rely on domestic suppliers for key parts replacements.
By singling out Micron, Beijing is sending an unmistakable message. Companies aiding and abetting the US government should think twice. They cannot afford to lose China’s huge market. And playing a double game like Micron will just backfire on them. The chip war has made many Western tech companies cagey. In the short-term, China’s tech industries may suffer. Longer term, though, it will spur them on to achieve self-sufficiency.