Will Biden gov't benefit Korean tech suppliers?

By Kim Bo-eun

The local tech industry is keenly watching President Joe Biden's administration for possible opportunities as new policies have been rolling out following the U.S. president taking office last month.

Attention is being paid in particular on how the new government will deal with the escalating conflict with China over sanctions on key IT companies.

President Biden is expected to engage more with U.S. allies in his diplomatic and economic strategy toward China, but the struggle to obtain the lead in key technologies is seen as likely to continue.

The White House last month referred to Huawei as an "untrusted vendor" that is posing a security threat to the U.S. A presidential official stated the U.S. would not have its telecom networks use equipment from such vendors and increasingly work with allies in securing their networks.

The Donald Trump administration earlier banned the use of the telecommunications supplier and smartphone manufacturer's equipment in 5G networks in the U.S. It also blacklisted China's foundry SMIC last year, which made it impossible for U.S. vendors to supply highly advanced chip-making equipment to the company.

Analysts believe that the Biden administration will continue such strategies to contain China, utilizing methods such as cutting the country off from global supply chains in the IT sector.

Expectations are Korean IT companies including those manufacturing smartphones and providing 5G technology services may benefit from the sanctions that have been imposed on Chinese companies.

This is expected to be the case for smartphone makers. According to market tracker Trendforce, Huawei's smartphone production is projected to fall to 45 million this year, from 170 million in 2020, resulting in its market share plummeting to 8 percent from 30 percent.

Huawei's competitors including Samsung are set to take the share the Chinese tech firm loses. Trendforce forecasts that Samsung's smartphone production will grow to 267 million this year, from 263 million in 2020. Its market share is projected to grow to 13 percent from last year's 11 percent.

Korean companies are also hoping for possible scenarios in which U.S. fabless companies such as Qualcomm or Nvidia will increasingly partner with foundry firms in Korea.

Taiwan's TSMC has benefited largely from the U.S. sanctions on Chinese entities, as firms such as Intel and Qualcomm scale up sourcing from the Taiwanese firm to substitute for China's sanctioned SMIC. The world's No. 1 foundry, TSMC has invested $12 billion into building a new production site in Arizona.

Samsung Electronics, meanwhile, is very nearly ready to expand the manufacturing line at its plant in Austin, Texas, at the request of the regional government amid increasing orders for foundry or contract-based chips. Samsung has asked the regional government to provide $900 million in tax and other financial incentives. Biden promised earlier to prioritize products made in the U.S., along with those of U.S. suppliers.

If circumstances work out in favor of Korean firms, they will see a surge in demand this year which would be backed by an apparent “super-cycle” for the semiconductor industry. The World Semiconductor Trade Statistics projected the chip market to grow by 8.4 percent this year.

This would also benefit smaller Korean suppliers as well, as key players in the complex supply chain, not only for Korean integrated device manufacturers, but also U.S. entities.

Major American fabless companies are seeking to heighten their competitiveness as competition heats up to secure technological superiority. Some are known to be reaching out to smaller Korean suppliers with cutting-edge technology.

“Companies are recognizing the need to partner with entities with key technologies to bring down costs while securing production for the future surge in chip demand,” an official of a local supplier said.

U.S. sanctions on Chinese companies, however, are expected to have a two-sided effect on Korean parts suppliers.

"Korean firms will be able to target the gaps that result as Chinese players are restricted by the U.S.," said Moon Jong-chol, a research fellow at the Korea Institute for Industrial Economics and Trade (KIET). "But this is like two sides of a coin, as Korean tech firms will see falling demand from their largest clients in China as production shrinks as a result of the sanctions."

Biden's environmental policies

Biden has pledged to support electric vehicles (EVs), as the world's largest economy seeks to achieve zero carbon emissions by 2050. The president last month stated plans to replace 645,000 government vehicles with electric cars assembled in the U.S.

Globally competitive Korean battery material makers are on track to benefit as U.S. and other global carmakers increasingly switch to battery-powered vehicles from gas-powered ones.

Material suppliers such as EcoPro BM have set up subsidiaries in the U.S. to supply the battery maker SK Innovation's Georgia plant. SK Innovation is set to supply batteries to Ford and Volkswagen, for which EcoPro BM will be producing cathode material. A cathode is one of the four major components in an EV battery, and has a large impact on performance, safety and price.

EcoPro BM has set up the U.S. subsidiary as a strategic base, with plans to add new production lines.