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Korea’s uphill battle in the chip war

Published: 06 Mar. 2025, 00:02

Lee Hyun-sang

The author is head of the editorial board at the JoongAng Ilbo.

“If Ukraine had retained its nuclear weapons.”

Watching the verbal sparring between U.S. President Donald Trump and Ukrainian President Volodymyr Zelensky, an unorthodox thought crossed my mind. When the Soviet Union collapsed in 1991, Ukraine inherited 176 intercontinental ballistic missiles and approximately 1,800 nuclear warheads. By sheer numbers, it possessed the world’s third-largest nuclear arsenal. If just a few of those weapons had remained, would Trump have dismissed Zelensky with a condescending “You have no cards to play”?

U.S. Vice President JD Vance, right, speaks with Ukrainian President Volodymyr Zelensky, left, as U.S. President Donald Trump listens in the Oval Office on Feb. 28. [AP/YONHAP]

Let me be clear — this is not an argument for Korea to pursue nuclear armament. The geopolitical risks and costs are too great. Ukraine did not willingly relinquish its nuclear weapons either. It lacked the economic, military and technological capacity to maintain them, and the global powers would not allow it. The best option available was the 1994 Budapest Memorandum, signed with the United States, Russia and the United Kingdom. In exchange for surrendering its remaining nuclear arsenal for dismantlement in Russia, Ukraine received guarantees of sovereignty and territorial integrity. That memorandum, which was never a treaty, is now nothing more than scrap paper.

If nuclear weapons are off the table, what is Korea’s ultimate strategic asset? Some might point to its conventional military, ranked fifth or sixth in the world. While military self-reliance is crucial, Korea’s true leverage in the international division of labor lies in its advanced manufacturing capabilities. The country’s manufacturing competitiveness ranks among the world’s top five, with the highest proportion of GDP derived from manufacturing among advanced economies at 28 percent as of 2021, according to UN data. The centerpiece of this strength is semiconductors — the linchpin of AI, often called the “nuclear weapon of the 21st century.”

The global AI race is dominated by the United States and China. Given linguistic, demographic and market factors, this trend will likely solidify. In this landscape, semiconductors serve as Korea’s geopolitical technology — an asset that enhances its global standing. Zhao Minghao, a professor at Fudan University in Shanghai, notes that “since the early 21st century, alliances and blocs centered around technology have become the focal point of great power competition.”

The problem, however, is that the burden of sharpening Korea’s “ultimate weapon” falls entirely on its corporations. While the government and local authorities provide some support in the form of tax incentives and administrative procedures, it pales in comparison to the massive subsidies offered by competing nations. Take, for instance, the rigid 52-hour workweek. Efforts to create exceptions for the semiconductor industry have been stalled by the main opposition party’s labor-friendly dogma. The party leader, driven by electoral considerations, has been wavering with contradictory signals. The Democratic Party has fast-tracked a semiconductor bill — without the critical exemption for the 52-hour workweek. As a result, companies may have to wait up to 330 days for the legislation to take effect. Calling it a “fast track” is a misnomer — it’s more like a “slow track.”

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The ruling party is no better. The semiconductor bill is about more than just work hours. It also involves establishing a government command center, supporting infrastructure for electricity and water supply, and streamlining permit approvals — issues that businesses are desperate to resolve. But the ruling party remains fixated on the work-hour exemption, not because it truly prioritizes the semiconductor industry but because it wants to draw a clear political contrast with the opposition. Trapped in reckless political maneuvering, the government’s capacity for strategic coordination has all but vanished.

Meanwhile, Korea’s semiconductor firms are fighting an uphill battle. A prime example is SK hynix’s Yongin Semiconductor Cluster, a project requiring a staggering 120 trillion won ($82.9 billion) in investment. It took six years just to complete land preparation. The first factory is scheduled to start operations two years from now, meaning the entire process will have taken eight years. By contrast, Taiwan Semiconductor Manufacturing Company (TSMC) completed its plant in Kumamoto, Japan, just two years after announcing the project in 2022. An SK hynix executive put it bluntly: “If we hadn’t bent over backward at every turn, even six years wouldn’t have been enough.”

The construction site of SK hynix's first fabrication plant at the Yongin semiconductor cluster in Yongin, south of Seoul. [SK HYNIX]

Korea’s land, as Hallym University Prof. Song Ho-keun describes it, is “historical and anthropological.” A complex web of cultural heritage sites, ancestral graves and clan ownership structures slows development. Unlike in the United States or Japan, where semiconductor factories are built on farmland owned by just a handful of people, Korean companies must navigate a bureaucratic labyrinth alone. To locate the relatives of those buried in some 500 unmarked graves on the Yongin site, SK Hynix employees scoured cemeteries during holidays, asking visitors if they recognized the tombs. To expedite land and property compensation, the company paid an additional 13 to 30 percent above appraised values.

The real challenge, however, is mediating conflicts between neighboring municipalities. SK Hynix’s Yongin plant relies on water from Yeoju and discharges wastewater into Anseong. Samsung Electronics’ plant in Pyeongtaek faced a decade-long dispute with residents of Anseong’s Wongok township over transmission lines. Because corporate taxes, including the 10 percent local tax, only benefit the host municipality, neighboring towns naturally feel shortchanged. It falls upon companies to negotiate directly with local residents and officials to resolve these tensions — often by offering “modified profit-sharing” mechanisms such as community contribution funds.

With the AI revolution unfolding and the second Trump administration wielding power in the United States, Korea’s semiconductor industry stands at a crossroads of opportunity and crisis. In a world where nations are waging an all-out “chip war,” semiconductor industry support is akin to military logistics. Losing a battle may be excusable, but failing in supply lines is unforgivable. Without more meticulous, decisive, and systematic support, the outcome of this war is all too predictable.

Translated using generative AI and edited by Korea JoongAng Daily staff.