Subscribe
E-Paper
Korean firms should avoid stray bullets from US-China tech war
SK hynix's plan to upgrade its chip-making facility in China by introducing state-of-the-art equipment from the Netherlands has hit a snag due to U.S. opposition, Reuters reported last Thursday. "The potential setback could make SK hynix the next victim of the geopolitical struggle between the United States and China," the wire service said. The incident shows that one of the biggest concerns for Korean semiconductor companies standing in the middle of the U.S.-China economic war has begun to come true.
The Korean tech firm is the world's second-largest memory chip maker, with a global market share of 27.2 percent in the third quarter, following Samsung Electronics' 44 percent. To beat its U.S., European and Chinese competitors chasing close behind ― with government support ― investment into new technology and equipment is quintessential. Considering the fact that SK hynix's plant in Wuxi, China, produces half of its DRAM chips, putting the brakes on new investment there could adversely affect its competitiveness.
The Biden administration has made it clear that Washington will not tolerate the flow of high-tech semiconductor equipment based on the U.S. and its allies' technology into China. America intends to keep China from emerging as the world's No. 1 manufacturer in both quantity and quality. Nothing has shown Washington's determination more than its pressure on Intel to abandon plans to increase silicon wafer production in China. However, China is the largest customer of Korean semiconductor makers, buying 40 percent of their output. If Korean companies fail to invest in their Chinese plants appropriately due to U.S. opposition, Beijing is likely to retaliate by targeting Korean companies instead of U.S. firms.
A fundamental solution is to widen the gap in technology and quality further so that Chinese companies have to purchase Korean semiconductors no matter what kind of conflict occurs. Even at home, however, SK hynix has been unable to break ground to build a semiconductor cluster in Yongin, south of Seoul, for more than a year, as it has been faced with area residents' opposition and delayed permits. Bureaucrats and politicians should combine bold support and deregulation to promulgate a special law promoting the semiconductor industry and pass it as soon as possible.
