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[Editorial] No victimization of Korea in the battle

Published: 25 Apr. 2023, 20:21

President Yoon Suk Yeol has much to solve in the economic area during his state visit to the United States. He is accompanied by the largest economic delegation of 122 businessmen due to the urgent need for Korea-U.S. cooperation amid the realignment in global supply chains. The government must fight for adequate consideration for South Korean companies in the U.S.-led global order.

Samsung Electronics, SK hynix, Hyundai Motor, and other companies have pledged ambitious investments of multibillion dollars in the U.S. Korean capital has largely contributed to U.S. President Joe Biden’s achievement of providing quality jobs in America.

Still, the Biden administration has caused disadvantages and uncertainties for Korean companies with policies like the Chips Act and the Inflation Reduction Act (IRA) aimed to promote reshoring in key industries and contain China’s rise in the high-tech area. The Chips Act demands chipmakers receiving subsidies for their facility investment to share their confidential business and manufacturing information and excess profits with the federal government, and restricts investments in China. The IRA has excluded Korean electric vehicles from the crucial subsidy that defines price competitiveness. Without correction or amendments to these discriminative provisions, the U.S. initiative to realign supply chains in high-tech areas to its favor cannot reap fruit.

The risk for the Korean economy sandwiched in the hegemony contest between the U.S. and China is escalating. Washington reportedly asked Seoul to contain Korean memory makers — namely, Samsung Electronics and SK hynix — from filling the shortfall if Beijing bans Micron Technology. The Financial Times reported that Beijing was considering prohibiting Micron’s chip sales in China and that Washington did not wish Korea’s bigger memory vendors fill the gap and capitalize on the U.S. company’s losses.

Samsung and SK are already dominant players in China. Samsung produces 40 percent of its NAND flash output in China and SK 45 percent of its DRAM chips. If China demands bigger supplies from the two chipmakers, they could come under a serious dilemma: they cannot ignore U.S. demand, but also cannot risk angering the host government. The operations of the two companies in China already face uncertainties because the grace period on the U.S. curb on equipment shipments to China ends in October. The two chipmakers must demand an extension of the grace period to run their factories stably in China.

Korea must go along with the U.S.-led supply chain initiative, but it cannot neglect its partnership with China at the same time. Korea must not be victimized in the fight between the U.S. and China. The Korea-U.S. alliance can be upgraded based on their mutual respect.