South Korea hints at joining Chip 4 Alliance? South Korean Foreign Minister: China's misunderstandings on chip alliance will be cleared up ahead of time

South Korean Foreign Minister Park Jin said at a symposium held by the foreign media correspondents club in Seoul at the Korea News Center on the 27th that he would decide whether to join the Chip 4 alliance based on national interests. If China has misunderstandings about this, diplomatic efforts will be made to eliminate misunderstandings in advance.

Park Jin said that the chip quad alliance led by the United States does not exclude specific countries and is moving in a direction that is beneficial to all relevant countries. Park Jin said that many media used the term "alliance" to refer to the organization, but in fact the alliance is just a dialogue and cooperation mechanism between major semiconductor research and production parties. South Korea will make a decision after carefully weighing the pros and cons of the four major areas for South Korea.

Park Jin also emphasized that South Korea can only benefit from becoming a "rule maker" rather than a "rule follower." The government is considering whether to join the mechanism from this perspective.

Referring to the South Korea-China relations, Park Jin said that considering the interdependence between the two countries, it is necessary for the two sides to communicate on stabilizing the supply chain. He also said that he looks forward to continuing to exchange views on the concerns of both sides when he meets with the Chinese Foreign Minister in China next month.

Regarding the issue of supply chain and Indo-Pacific Economic Framework (IPEF) mentioned by the foreign ministers of South Korea and China during their meeting in Bali earlier this month, he said that both sides acknowledged that there were differences of opinion between the two countries, but China understood South Korea's position at that time. He stressed that South Korea will work with China to actively promote high-level strategic communication, accurately understand each other, reduce unnecessary misunderstandings, and expand common interests.

According to Yonhap News Agency on the 27th, as the "technological hegemony competition" between the United States and China intensifies, South Korea is standing on the test bed surrounding the adjustment of the US-led semiconductor supply chain, namely the establishment of the so-called "Chip Quad Alliance".  

The report said that judging from the internal atmosphere of the South Korean Ministry of Foreign Affairs on the 27th, it is difficult for South Korea to reject the semiconductor "cooperation" plan proposed by the United States, Japan, South Korea, and Taiwan in reality, out of consideration for maintaining the generation gap in semiconductor technology. But even if it participates, the South Korean Ministry of Foreign Affairs is very wary of seeing this as a so-called "decoupling" behavior that excludes China from the semiconductor supply chain. The South Korean government has a negative attitude towards the media's characterization of the organization as a "chip alliance" because the word "alliance" itself has a "closed meaning." Therefore, the South Korean government has proposed that other important countries in the semiconductor field, such as the Netherlands, can also join this organization. The South Korean government also stated in relevant discussions that cooperation among all parties should not only be limited to the semiconductor supply chain, but should also include talent training, research and development, and financial support cooperation for the semiconductor industry.

The report said that the reason why the South Korean government did this is that it does not want to cause friction with China while joining the "Chip Quad Alliance". The report believes that although the South Korean government plans to eliminate any possible "misunderstandings" through "active communication" with China, it will not take a negative attitude in negotiations with the US semiconductor supply chain. A senior official of the South Korean Ministry of Foreign Affairs said that the decision to join the "Chip Quad Alliance" is not something that can be delayed for a long time, and a decision will be made when necessary.

As the news that the South Korean government is considering joining the US-led "Quad Alliance" spread, the domestic semiconductor industry, including Samsung Electronics and SK Hynix, is feeling uneasy. China is South Korea's largest semiconductor export market and main production base, and the "Quad Alliance" has the nature of excluding China, so the industry is worried that if it is not careful, the domestic semiconductor industry ecosystem will be greatly shaken. Not only experts, but also some people within the government argue that this is an "inevitable choice", but some people believe that "it should be cautious."

The presidential office said on the 20th that it is organizing the positions of the "Chip Quad Alliance" with the relevant departments as the center. A senior official of the presidential office told the Hankyoreh that "the discussion is being carried out from multiple aspects, including the benefits for South Korea, what aspects will be helpful, and whether it is at the government level or the private level." Another official said, "We will make a decision after carefully considering China's concerns in the direction that is beneficial to the national interest." The government will make a decision within the deadline set by the United States (end of August). An official from the Ministry of Trade, Industry and Energy said, "The negotiations are just at the beginning stage, and this is not something that a government department can decide."

Previously, in order to contain China's "semiconductor rise", the United States proposed to South Korea, Japan, and Taiwan in March this year to establish a "chip quad alliance". That is, to build a "semiconductor supply chain cooperation mechanism" with the original semiconductor technology of the United States, semiconductor material components of Japan, and semiconductor manufacturing capabilities of South Korea and Taiwan. The United States requires the South Korean government to decide whether to participate in the first working meeting to discuss the establishment of the "chip quad alliance" before August.

South Korean semiconductor companies are embarrassed about the "Chip Quad Alliance". Although they agree to cooperate with semiconductor powers such as the United States, the positioning of relations with China is a problem. The import and export ratio of the domestic semiconductor industry to China has reached 40% (including 60% for Hong Kong). Last year, the semiconductor trade volume between South Korea and China was US$76 billion, more than three times that of 10 years ago. In the total sales of Samsung Electronics and SK Hynix, which rank first and second in the world in the field of memory chips, exports to China account for more than 30% respectively.

Recently, the dependence on China has increased significantly not only in terms of demand but also in terms of production. Samsung Electronics has semiconductor factories in Xi'an and Suzhou, and SK Hynix has semiconductor factories in Chongqing and Dalian. If the relationship with China becomes unharmonious, not only exports but also production will be affected. In a recent report published by the Hyundai Economic Research Institute, it was pointed out that the domestic semiconductor industry is a structure that trades with ASEAN, Taiwan, the United States, Japan, etc. with China as the center. After experiencing Japan's export restrictions, China's material imports have increased, and the dependence on China has further increased.

In fact, China has also shown a sensitive reaction to the "Quad Chip Alliance". Chinese Foreign Ministry spokesman Zhao Lijian said on the 19th that "the United States has politicized economic and trade issues" and expressed the hope that relevant parties will uphold an objective and fair position, proceed from their own long-term interests and fair and just market principles, and do more to maintain the stability of the global chip industry chain and supply chain. Japan and Taiwan have the intention to actively participate in the Quad Chip Alliance. Taking this into account, China is exerting pressure on South Korea, which currently has an ambiguous attitude.

A senior government official said in response to China’s statement: “The United States did not explicitly exclude China from the (Quad) Chip Alliance. China’s reaction was oversensitive. South Korea should not only cooperate with the United States, but also with China.”

Experts argue that joining the "Chip Quad Alliance" is an "inevitable choice." Kim Ryang-peng, a professional researcher at the Industrial Research Institute, said, "The United States has most of the original semiconductor technology, and controlling its own technology may have an impact on semiconductor production in other countries. Countries that do not join the semiconductor alliance led by the United States may not be able to produce semiconductors in the worst case." Park Jae-geun, president of the Korea Semiconductor Display Technology Association (Department of Convergence Electronics Engineering at Hanyang University), said, "If you don't join the 'Chip Quad Alliance', you won't be able to obtain semiconductor equipment and component materials from the United States and Japan. Samsung and SK's factories in China will not be able to produce without equipment."

In fact, SK Hynix's memory chip factory in China has been upgrading its engineering since last year, but due to the export control of the United States, the exposure equipment (EUV) required for ultra-fine engineering cannot be shipped to China, and it is still facing difficulties. People in the semiconductor industry said: "If the process cannot be improved in time, it will be squeezed out of the market in the competition with other companies."