Who shelters Samsung and SK hynix?

Home > Opinion > Columns

print dictionary print

Who shelters Samsung and SK hynix?



Lee Sang-ryeol

The author is an editorial writer of the JoongAng Ilbo.

The Financial Times reported last month that Washington asked Seoul to advise Korean chipmakers such as Samsung Electronics and SK hynix against increasing their output and sales in China to make up for the expected supply shortfall should Beijing ban chip sales by U.S. memory producer Micron Technology. The report underscores the vulnerability of Korea and its companies to the ongoing technology hegemony war between the U.S. and China. Washington has not denied the FT report.

The U.S.’s intention behind the request (read: pressure) for Korea’s participation in its chip war against China seems to be clear. It wants to deal an irrevocable blow to China on the semiconductor front. What the U.S. really wants from China could be to make Beijing give up sanctioning Micron. In that case, the U.S. can achieve its goal without shedding any blood in a battlefield.

Micron founded in 1978 survived the chip war between the U.S. and Japan in the 1980s. China is still a major market for the U.S. chipmaker. Micron generated one fourth of last year’s revenue from China and Hong Kong.

Micron is suspected to have been behind Washington’s pressure. For its part, it would be the best if the company can avoid sanctions by thwarting China’s plan to rely more on Korean chips. Even if Micron receives sanctions, it would still be acceptable if the company does not lose its market share to its Korean competitors in China. Beijing’s decision is yet to be known. But if Samsung and SK cannot make up for the expected chip shortage in the China market, Micron’s scheme could be working already.

The U.S. is bent on “nationalizing” its chip industry, as Washington regards semiconductors as the key weapon for technology and economic security. The chip industry drew government assistance citing “national interests” whenever it faces hardship. The U.S. retaliatory action to push out price-competitive and quality Japanese semiconductors out of the U.S. market in the 1980s owed much to aggressive lobbying by chip companies based in Silicon Valley. The U.S. chip industry led by behemoth Intel played a primary role in legislating the CHIPS and Science Act which promises $52 billion subsidies to chip investments in the U.S.

But the law has a lot of discriminative provisions such as the mandate to share profit and other confidential business information with the U.S. government and restrictions on chip production in China even for Korean companies if they receive subsides for their investments in America despite the touted chip and security alliance. Samsung and SK are now forced to share the misfortune of their U.S. competitor in China. But President Yoon Suk Yeol stopped short of finding relief for Korean chipmakers during his seven-day state visit to the United States in the last week of April.

Korea’s household chip names are going through their worst slump. The chip division of Samsung Electronics incurred a whopping 4.6 trillion won ($3.5 billion) in operating losses in the first quarter. SK hynix recorded 3.4 trillion won in losses in the same period.
 
President Yoon Suk Yeol, right, and U.S. President Joe Biden give the Samsung campus in Pyeongtaek a thumbs up while inspecting the massive chip plant on May 20, 2022 before having their first summit in Seoul the following day. [NEWS1]


But whether Korean players can keep up their dominance in the memory sector remains uncertain. Besides, the technology gap is ever-narrowing. The head-on collision between the U.S. and China has narrowed the business sphere for Korean chipmakers. The Economist in its latest edition advised Samsung Electronics to be “wary of Intel-like complacency,” pointing out that Samsung is no longer the “last man standing” in the boom-and-bust chip cycle and has already lost some of its innovative edges in DRAM and NAND manufacturing technologies to SK hynix and Micron.

The Korean chip industry has gone through many ups and downs over the last 40 years. But they have never been so swept away in the hegemony contest between global powers like today. U.S. companies supported the rise of Korean players to the chip sector in the late 1980s on the reasoning that the enemy (Korea) of your enemy (Japan) is your friend, according to the book “Chip War” written by Tufts University professor Chris Miller. But the U.S. is now bullying its friend (Korea) to contain its new enemy (China).

Freeriding is not allowed in alliance too. The U.S. has already brought Japan and the Netherlands onboard to its export curbs on chipmaking equipment bound for China. The bills from the alliance with the U.S. will keep coming. The U.S. government and enterprises are moving as one in the chip war. Korea must devise a national strategy to defend the interests of its companies, including Samsung and SK hynix.
Log in to Twitter or Facebook account to connect
with the Korea JoongAng Daily
help-image Social comment?
s
lock icon

To write comments, please log in to one of the accounts.

Standards Board Policy (0/250자)