US-China conflict ignites new 'Cold War' in supply chain

Korea Chamber of Commerce & Industry Chairman Chey Tae-won speaks to reporters on the latest issues surrounding Korean companies during an interview at KCCI's headquarters, Wednesday. Courtesy of KCCI

By Kim Hyun-bin

Korea Chamber of Commerce & Industry (KCCI) Chairman Chey Tae-won says the ongoing trade conflict between Washington and Beijing has altered the global supply chain structure, resulting in a renewed "Cold War."

"Looking at the global supply chain, there is a change, especially in the context of the U.S.-China conflict. In the past, the entire global supply chain was shared, but now they are forced to split into factions," Chey said during a year-end meeting with reporters at the KCCI's headquarters, Wednesday. His remarks were embargoed until Sunday afternoon.

As semiconductor shortages have been impacting backbone industries in the United States ― from iPhones to new vehicles ― since the COVID-19 outbreak early last year, Washington has started to reorganize its global supply chain, focusing on the semiconductor and battery industries.

Washington is calling on the Korean government and businesses to back U.S. President Joe Biden's semiconductor initiatives. At the same time, Beijing has also asked the Korean government to explore ways to strengthen cooperation in the chip and battery supply chains.

Korea has been stuck in the middle of a tug-of-war between the U.S. and China, as Korean semiconductor companies require advanced technology from the U.S., while China is the largest market and core manufacturing base for Korean companies. According to the Korea International Trade Association (KITA), China accounted for 41.4 percent of Korea's semiconductor exports as of October of this year.

The KCCI chief also pointed out that the supply chain restructuring presents "both opportunities and risks," but is expected to benefit some industries more than others. KCCI is the country's most influential business lobby representing the interests of Korea's leading conglomerates.

"We believe that semiconductor demand will continue solidly, and we are also increasing the supply side, so there will be no problem with the supply of semiconductors," he said.

Specifically, the automotive industry has been hit hard by chip shortages leading to the temporary shutdowns of plants.

"I didn't know the chip shortages would have this much impact," Chey said.

Countries were hit by memory chip shortages in 2017 and 2018, which Chey says show the unpredictable nature of the industry and prove just how difficult it is to prepare ahead.

"No one could have predicted it," he told reporters.

Chey went on to say that Korea is not the only country to face semiconductor and battery shortages. He said that the problem should be viewed as a matter of national security that can be resolved through communication with other countries.

"Each country is approaching the issue in regards to security. It's not a matter of diplomacy or national defense, but rather, the issue is being seen as part of developing economic security. In Europe and the United States, this issue is also being addressed by their respective defense agencies. Aside from traditional thinking, they see economic security as a national defense issue, and come up with their own policies," Chey said. "Semiconductors and carbon issues are all connected. It is a global problem and our core industries are all interrelated. Korea must set a vision and direction and communicate with other countries."

Chey believes global warming is a "terrifying" issue that must not be ignored, citing a report by the Intergovernmental Panel on Climate Change estimating that a two-degree Celsius rise in global temperature will create more than 10 times the cost of carbon neutrality in terms of economic losses, and urging the public and private sector to cooperate to achieve the goal of net-zero carbon emissions.

"A policy that imposes fines and taxes on carbon emissions alone cannot achieve this goal. Also the government's policy focused on reducing carbon is not enough. I think there needs to be a public-private cooperation project," he added.

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