Samsung, SK in dilemma over US pressure not to boost chip output in China

President Yoon Suk Yeol and U.S. President Joe Biden take a look around Samsung Electronics' semiconductor factory in Pyeongtaek, Gyeonggi Province, under the guidance of Samsung Chairman Lee Jae-yong, third from left, May 20, 2022. Yonhap

Gov't urged to take firm stand on Washington's request

By Baek Byung-yeul

Korea's top memory chipmakers ― Samsung Electronics and SK hynix ― are caught in the middle of an escalating U.S.-China semiconductor tussle, facing pressure from Washington to stop boosting semiconductor output in their largest market, China, according to industry experts, Tuesday.

They urged the Korean government to take more steps to protect them, claiming it is going too far to tell for-profit companies to make business decisions based on the logic of a geopolitical power struggle.

On Monday, the Financial Times reported that the U.S. government has asked the Korean government to prevent Korean chip companies from filling the shortage if China bans sales of American chipmaker Micron's memory chips.

The U.S. request to Korea came after China began a security review of Micron, the largest memory chipmaker in the U.S., this month. China said the review is a routine oversight measure, but the U.S. took it as a countermeasure to its attempts to curb the growth of China's chip industry.

The news made an immediate impact here as it hit local media just as President Yoon Suk Yeol left for Washington D.C. on Monday afternoon for a state visit with a 122-member economic delegation consisting of the leaders of Samsung, SK and other conglomerates.

Experts said that if the report is true, it would be an outrageous intrusion into the activities of private businesses of a sovereign nation.

“It seems like the government is being dragged along by the U.S. too unilaterally. I understand that the U.S. wants to curb China's semiconductor industry, but I wish our government would take the initiative to talk to them. We are the powerhouse in the semiconductor industry, especially in memory semiconductors and this should not be overlooked,” Lee Jong-hwan, a professor at the Department of System Semiconductor Engineering at Sangmyung University, said.

“If Korean companies are pressured not to increase their market shares in China, it will be difficult for them to stay in business as it is already difficult enough for them to face sanctions for doing business there,” Lee added.

Both Samsung and SK declined to comment on the report.

The U.S. has attempted to limit China's chip technology development with a series of sanctions. Under its latest restrictions, chip companies that receive subsidies in the U.S. are banned from expanding semiconductor production by more than 5 percent for advanced chips and 10 percent for older technology in China for 10 years after receiving the benefits.

Another expert said that the U.S. move is reminiscent of the so-called Super 301 clause, which was implemented in the 1980s to limit the movements of Japan, which had grown to economically threaten the U.S. and added the Korean government has no choice but to increase its cooperation with the U.S. in the end.

The Super 301 clause authorizes retaliation in a wide range of areas when a trading partner's unfair trade behavior restricts U.S. commerce. Washington used this provision to pressure Tokyo through measures such as doubling the share of American-made chips in Japan and halting Japan's exports of low-cost chips to the U.S. The series of measures eventually put Japan's semiconductor industry into a state of irreversible decline.

“This move is reminiscent of how the U.S. used the Super 301 to destroy Japan's semiconductor industry. I think Korea is in a similar situation now. President Yoon Suk Yeol traveled to Washington, D.C., to meet with U.S. President Joe Biden and will need to convey Korea's position clearly,” Kim Dae-jong, a professor of business administration at Sejong University, said.

“To prevent China from catching up, Washington wants to stop the growth of Beijing's semiconductor industry. Unfortunately, we are kind of caught in the middle. The U.S. wants to keep Korean companies out of China in the long run,” Kim added.