'Chip 4' is an offer Korea can't refuse, Ahn says after Pelosi visit

Economy

Published: 04 Aug. 2022, 17:19 Updated: 04 Aug. 2022, 19:04

'Chip 4' is an offer Korea can't refuse, Ahn says after Pelosi visit

U.S. Speakers Nancy Pelosi during a meeting with Korean Speaker Kim Jin-pyo at the National Assembly in Seoul on Thursday. [JOINT PRESS CORPS]

U.S. Speaker Nancy Pelosi's Asia tour upped the pressure on Korea to join "Chip 4."

She met with TSMC Chairman Mark Liu while in Taipei but did not visit Korean chipmakers.

It has been reported that the Joe Biden administration has proposed a semiconductor supply alliance to Korea, Taiwan and Japan in March with an August deadline for making a commitment.

"Speaker Pelosi's visit indicates that the time for Korea to choose has neared," said People Power Party legislator Ahn Cheol-soo in a Facebook post titled "Joining Chip 4 is an offer one can't refuse" — alluding to "The Godfather" — on Thursday.

Ahn, who is a doctor, start-up CEO and a former presidential candidate, stressed that the sole purpose of Pelosi's trip is the last three stops — Taiwan, No. 1 in foundry, Korea, No. 1 in memory chips, and Japan, No.1 semiconductor equipment.

"Our biggest concern is the opposition from China, which took 60 percent of semiconductor exports last year," Ahn noted. "That's why our decision is harder than for the U.S., Japan and Taiwan."

Noting that the meeting between Pelosi and Liu is significant, Ahn stressed that Korea has to look at the situation objectively.

"The United States has the most patents in semiconductors and their technology especially in design is unparalleled," Ahn noted. "Japan has the best source technology in materials, parts and equipment.

"While we are the world's strongest in memory semiconductors, we have to face the fact that this is has been achieved through ecosystem symbiosis with the U.S. and Japan."

He said the national loss will be great if Korea refuses to join the Chip 4.

People Power Party Ahn Cheol-soo speaks at a forum held in Seoul in July. [KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY]

The government has yet to respond, although Minister of Trade, Industry and Energy Lee Chang-yang told lawmakers on July 29 that the National Security Council has started to discuss the issue.

"The government has been discussing what the impact would be on each different industry regarding Chip 4," Lee told lawmakers.

While Korea needs to expand its investment in the U.S., it needs to prepare for China's retaliation.

"It will be the biggest loss if we don't join the Chip 4 alliance," said Yoon Young-kwan, Seoul National University professor emeritus of political science and international relations and a former foreign minister.

Electronic and electrical engineering professor Kim Yong-serk at Sungkyunkwan University also supported Korea joining the Chip 4 alliance.

"The plan of remaining neutral isn't a good plan," Kim said.

Seo Chang-bae, Pukyong National University professor of Chinese studies, cautioned Korea.

"There will be a time when the supply chain crisis stabilizes and the semiconductor market declines," Seo said. "When it comes, there will be many business opportunities in China."

Retaliation is seen in a wide range of industries.

"If China bans imports of Korean semiconductors or restricts Samsung Electronics or SK hynix production plants in China, the country could face a negative influence on its own industry," said Kim Yang-paeng, a senior researcher at the Korea Institute for Industrial Economics and Trade. "It could restrict exports of other products to Korea that are highly dependent on China."

Sungkyunkwan University's Kim projected that the likely target of export restrictions from China will be rare earths and lithium, which are crucial to batteries.

"China usually takes its time and takes action at a decisive moment," Pukyong National University's Seo said.

Kang Gu-sang, a researcher from the Korea Institute for International Economic Policy, said Korea needs to request the U.S. refrain from escalation.

"We need to persuade China that the purpose is to get a stable supply of source technology and equipment from the U.S. and not an exclusion of China," Kang said.

The U.S. Senate last week passed legislation that authorizes $52 billion of subsidies for U.S. semiconductor production and a 25 percent tax credit on semiconductor investment.

BY LEE HO-JEONG, LEE SU-JEONG [lee.hojeong@joongang.co.kr]