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INTERVIEWUS midterms unlikely to lead to truce in Washington-Beijing chip war

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Voice of US chip industry stresses S. Korea's role in US innovation

By Kim Yoo-chul

The Biden administration may have braced itself for an unpleasant time on the first day of the U.S. midterm elections because the results threaten the Democrats' control of Congress.

While who will control the Senate remain a toss-up, the Republicans will likely seize control of the House of Representatives, the outcome, viewed as an "inflection point," will determine how effective the U.S. president's ambitious legislative agenda will be during his second term in office. Internationally, he's led a coalition of like-minded countries helping the United States continue its crackdown campaign on China's technology industry.

Political analysts expect President Biden will have to rely more heavily on executive orders and shift to target areas ― such as foreign affairs and environmental regulations ― where he can be better positioned to act independently of Congress. The outcome of the 2022 midterm elections will come early next week, according to them.

SIA President and CEO John Neuffer
SIA President and CEO John Neuffer
Nevertheless, the outcome itself won't make any huge difference for Biden's initiatives for the renaissance of U.S. manufacturing because political observers and trade policy officials, here, say that they do not doubt that both parties will want to continue with projects such as building better infrastructure for electric vehicles, inviting foreign companies to build on U.S. soil for new jobs and improving the U.S.' capacity to move semiconductor supply chains out of China.

South Korea, Japan and Taiwan are party to the U.S.-led chip alliance talks, better known as Chip 4, as Washington wants to secure its semiconductor supply chain and hopes to stop Beijing from reaching advanced technology status in the industry.

Speaking to The Korea Times, head of the voice of the U.S. semiconductor industry said that the Biden administration won't pull back on its sanctions policies against the technology industry of China.

"It remains to be seen what policy decisions will be made following the U.S. midterm elections, but it seems unlikely there will be a significant shift in export control policy," said John Neuffer, president and CEO of Semiconductor Industry Association (SIA). Neuffer, who has been involved in the semiconductor industry for decades, served at the Office of United States Trade Representative (USTR) in Washington and as deputy assistant to USTR for Asia-Pacific Economic Cooperation (APEC) affairs.

The SIA aims to boost U.S. leadership in semiconductor manufacturing, design and research by working with Congress, the administration, and key industry stakeholders to encourage policies and regulations that fuel innovation and propel business.

Neuffer said that the United States understands the goal of ensuring national security. "The SIA urges the U.S. government to implement rules in a targeted way ― and in collaboration with international partners ― to help level the playing field and mitigate unintended harm to U.S. innovation," he responded.

The latest U.S. controls are fine-tuned as Washington has shifted its focus in terms of applying them only to the most-advanced chips, which China is unable to manufacture itself. Several unnamed Samsung officials said by telephone that the United States is aiming to prohibit the export of cutting-edge semiconductors in China, followed by its move to limit the export of equipment and components.

U.S. President Joe Biden delivers remarks on CHIPS manufacturing, at Onondaga Community College in Syracuse, New York, U.S., October 27, 2022. Reuters-Yonhap
U.S. President Joe Biden delivers remarks on CHIPS manufacturing, at Onondaga Community College in Syracuse, New York, U.S., October 27, 2022. Reuters-Yonhap

Plus, the U.S. wants to restrict U.S. nationals with proven skills from getting paychecks with Chinese firms, thereby curtailing knowledge transfer. Lastly, they said Washington wants only its allies to have access to essential U.S. equipment and added that these calibrated approaches are mostly aimed at degrading China's semiconductor research, identified as strategically important from a national security standpoint, which includes areas of artificial intelligence (AI), quantum computing and EVs.

"China is the world's largest market for semiconductors and plays an important role in the overall semiconductor supply chain. We believe any export controls should be narrowly targeted at technologies with a direct nexus to national security and should not extend to widely available commercial products," the SIA chief said.

"This targeted approach will ensure the U.S. addresses its national security goals while not inadvertently harming U.S. chip companies," according to the CEO. SIA's estimates show that China had 7 percent of the overall global share in semiconductors as of 2021. The United States had 46 percent, followed by South Korea, Japan, the EU and Taiwan with 21 percent, 9 percent, 9 percent and 8 percent, respectively. China's global share, however, is on a growth trajectory.

Chip 4 framework to focus on R&D collaboration

Both Democrats and Republicans believe the U.S. chip industry is a vital and a growing part of the world's largest economy. The industry's ability to provide key inputs into a variety of products throughout the broader economy is evidenced by its significant contribution to the U.S.' GDP and the number of domestic jobs it supports.

As the use of semiconductors is essential to virtually all supply chains in every industry, thereby making them indispensable to the economy, the SIA said that it is vital to expand semiconductor research.

The American and Chinese flags wave at Genting Snow Park ahead of the 2022 Winter Olympics, Feb. 2, 2022, in Zhangjiakou, China. The Commerce Department is tightening export controls to limit China's ability to get advanced computing chips, develop and maintain supercomputers, and make advanced semiconductors. AP-Yonhap
The American and Chinese flags wave at Genting Snow Park ahead of the 2022 Winter Olympics, Feb. 2, 2022, in Zhangjiakou, China. The Commerce Department is tightening export controls to limit China's ability to get advanced computing chips, develop and maintain supercomputers, and make advanced semiconductors. AP-Yonhap

Neuffer said the SIA welcomes international government dialogue that aims to strengthen the global semiconductor supply chain and expects the member countries of the Chip 4 to explore the best possible way to further strengthen collaboration in the semiconductors industry.

"While the Chip 4 framework is still in its early stages, we look forward to seeing how it develops. We hope it can focus on appropriate issues such as workforce development and R&D collaboration, and we hope it can take a more inclusive approach towards membership," the chief executive added.

According to the SIA chief, there is a high chance for South Korean chip manufacturers, which have operations in the United States, to receive more subsidies from the U.S. government under the CHIPS and Science Act, the legislation signed by President Biden. The bill offers $52.7 billion in subsidies for U.S. semiconductor manufacturers and research and is regarded as the U.S.' utmost effort to cut its dependence on South Korea and Taiwan for overseas-produced advanced chip technologies.

No specific guidelines for evaluating grant applications are known yet and it's also unclear when chip plant-building projects will be financed. The world's top memory chipmaker Samsung Electronics has recently confirmed its $17 billion investment plan to build a new foundry chip plant in the city of Taylor, Texas, a few miles away from its existing massive foundry chip-making plant in Austin, Texas. SK is also planning to invest more in the expansion of its chip packaging line in the United States.

"Our expectation is that companies headquartered outside the U.S. will have ample opportunity to receive government incentives to expand operations in the U.S. That has been the stated goal of President Biden and others in his administration, and we believe this is the correct approach. We should invite growth and innovation in the U.S. from overseas, including from South Korea," Neuffer said.

As the global semiconductor market is in the hands of just a few countries, this high level of concentration may present a business continuity risk, especially in territorially disputed Taiwan. China still views Taiwan as a renegade province and has unequivocally stated several times that it aims to "reunify" with the island.

Stressing Taiwan's central role in the global semiconductor supply chain as Taiwan is home to TSMC, the global foundry king, the SIA chief said, "Taiwan is an essential part of the global semiconductor supply chain, and any turmoil in that part of the world could be very harmful to our industry and countless downstream sectors."


Kim Yoo-chul yckim@koreatimes.co.kr


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