[ANALYSIS] Seoul asked to use chips as leverage in ties with Beijing

Former sex slave Lee Yong-soo, right, and Yang Geum-deok, a victim of Japan's wartime forced labor, attend a rally against the government's move to improve relations with Japan in Seoul, March 1. AP-Yonhap

Despite S. Korea's proclivity for Quad, Beijing needs Seoul's help to advance semiconductor self-sufficiency

By Kim Yoo-chul

South Korea's foreign policy under President Yoon Suk Yeol has moved away from the country's previous stance of "strategic ambiguity" under the former Moon Jae-in administration and toward strengthening relations with the United States.

The latest example representing the Yoon administration's commitment to U.S.-led policy initiatives is South Korea's decision to compensate laborers forced to work at Japanese factories during World War II. The proposal is facing heavy criticism from some victims and South Korea's main opposition party as just a few wartime Japanese companies are expected to marginally contribute to a fund created by South Korean firms that benefited from a 1965 treaty that normalized diplomatic relations between Seoul and Tokyo.

The proposal to create the civilian fund reflects South Korea's push to repair frayed bilateral ties with Japan, which have deteriorated over the past few years due to historical issues. But it also reflects South Korea's acceptance of "indirect requests" by the U.S. to restore the bilateral relations with Japan.

The U.S. wants South Korea and Japan to overcome their differences in order to pursue mutual interests and jointly tackle North Korea's nuclear provocations and China's increasing global influence, according to experts at leading think tanks in Washington, D.C.

Ellen Kim, deputy director of the Korea Chair at the Center for Strategic and International Studies (CSIS), and Joshua Fitt, an associate fellow for the Indo-Pacific Security Program at the Center for a New American Security, told The Korea Times that a future in which South Korea-Japan ties flourish does matter a lot in deterring any unilateral attempt to revise the status-quo, because Seoul and Tokyo are economically powerful and successful democracies that have stakes in preserving the rules-based liberal international order.

Now, as the White House is working to counter North Korea and China with South Korea's involvement in the multilateral security consultative body known as the Quadrilateral Security Dialogue (Quad), the South's leader plans to seek opportunities for various informal partnerships and consultations on "specific Quad initiatives" during his planned summits with Japanese Prime Minister Fumio Kishida and U.S. President Joe Biden, according to Washington officials.

In this photo provided by South Korea's defense ministry, a U.S. Air Force B-1B bomber, top, flies in formation with Republic of Korea Air Force F-15K fighters over South Korea during a joint air drill, March 3. AP-Yonhap

"It seems like the incumbent Yoon administration is hoping to join multilateral consultative security discussion groups based on the Quad Plus to better manage North Korean nuclear threats. If South Korea were to join the group, it will mark a total shift in the country's foreign policy, because that signifies the country's departure from an engagement-centric North Korea policy earlier sought by the former Moon administration," an aide to the ex-president, who handled inter-Korean affairs, said in a telephone interview.

Regarding South Korea's pursuit of formalizing its membership in the Quad Plus, political analysts in Seoul said any decision by the South to join the framework could negatively impact ties with China.

"China is South Korea's largest trading partner. Beijing wants Seoul to contribute more to its projects in advancing tech self-sufficiency. Regarding an issue about South Korea formally joining Quad Plus, I would say there are many things to consider and also many things to overcome," Park Jeong-ho, a professor at Myongji University, said.

'Anti-China alliance'

Because Beijing views the Quad and Quad Plus an anti-China alliance backing the U.S.-led Indo-Pacific strategy, South Korea needs to highlight its role in some of the Quad's working groups, according to security experts.

"Any efforts by the U.S. to deepen military cooperation with South Korea, Japan, and other regional countries to address North Korea issues will likely make China uncomfortable since China could perceive such cooperation as being targeted at itself, as we saw from the THAAD case," Kim, the CSIS deputy director, said.

U.S. President Joe Biden, right, and Chinese President Xi Jinping meet on the sidelines of the G20 Summit in Nusa Dua on the Indonesian resort island of Bali, Nov. 14, 2022. AFP-Yonhap

Both China and South Korea need each other.

Beijing's "Made in China 2025" policy aims to increase the country's chip self-sufficiency rate to 70 percent. The self-sufficiency rate includes the production of semiconductors by foreign companies on Chinese soil. However, this strategy has struggled to meet its targets because the U.S. and like-minded countries including the Netherlands and Japan are putting restrictions on their advanced chip technology exports. According to estimates by International Business Strategy, a market research firm, China's semiconductor self-sufficiency rate last year remained 25.61 percent.

"South Korea has to be smart when it comes to formalizing its Quad Plus membership. Because of the huge struggles of Chinese domestic chipmakers in terms of technology development, Samsung and SK's presence in the Chinese memory chip industry is substantial and huge in terms of improving China's self-sufficiency rate for chips," said an executive at SK, adding that South Korea is well positioned to pursue the country's integration of some Quad working groups on specific issues given Seoul's strengths in memory semiconductors.

Samsung and SK operate massive memory chip manufacturing plants in the Chinese cities of Xi'an, Wuxi and Suzhou. Seoul's trade ministry said it was in discussions with U.S. officials over the terms of requirements for receiving federal provisions under the CHIPS Act.

The recipients of the chip subsides program will be barred from engaging in technology licensing efforts or expanding semiconductor manufacturing capacity in China for 10 years. In 2022, the U.S. granted one-year exemptions for the South Korean chip duo from this rule to restrict exports to China of advanced chips and semiconductor manufacturing equipment

If China doesn't advance its own technological capability, chip supply will be strained in times of new crisis as seen by the case in the very early days of the COVID pandemic. China acknowledged that its economy could be vulnerable as it relies too much on Samsung and SK for semiconductors.

"Within that context, the Chinese government won't apply any economic coercion on South Korean companies there, as was the case during the THAAD incident, just because of South Korea's inclination to discuss specific priorities within an expanded Quad format. But the point is that the government should persuade China that its closer integration with Quad working groups does not threaten China's national security," said Kim Yang-paeng, an analyst at the Korea Institute for Industrial Economics and Trade.