Korean chip industry responds to American ＂ultimatum＂, and it is difficult for business circles to give up the China market.

　　[Global Times special correspondent in South Korea Zhang Jing Global Times reporter Ni Hao] On July 21, South Korea announced an ambitious "semiconductor superpower strategy", which plans to guide enterprises to complete 340 trillion won (about 1.75 trillion yuan) in semiconductor investment by 2026. However, compared with the grand strategic planning, the most urgent task of South Korea’s chip industry at present is to respond to the "ultimatum" of the United States — — The deadline for the United States to unilaterally draw South Korea into the "Chip Quartet Alliance" is August 31. After visiting South Korea on the 19th, US Treasury Secretary Yellen made a high-profile promotion of deepening cooperation between the United States and South Korea on "supply chain security", which was considered as a further blow to South Korea. South Korea’s "Asia Daily" said that at present, Japan and Taiwan, China are very active in participating in the alliance, but South Korea needs to "think again". The data shows that the export to China accounts for 60% of the total export scale of Korean chips. For the Korean chip industry, it is almost impossible for China market to give up. Many parties are watching closely what choices South Korea will make in the face of the "ultimatum" of the United States.

Data Map Source vision china

　　Sword refers to "semiconductor superpower"

　　On the 21st, the South Korean government announced the development support plan for the semiconductor industry, focusing on training talents and realizing self-sufficiency in semiconductor materials. South Korea’s Minister of Industry, Trade and Resources, Li Changyang, announced the "Semiconductor Super Power Strategy" on the same day. In order to encourage related enterprises to complete 340 trillion won investment in the semiconductor industry in the next five years, the Korean government will provide financial support for the infrastructure required by the semiconductor park, and will also expand the tax incentives for semiconductor equipment investment and R&D, raising the tax deduction rate of equipment investment by large enterprises to 8% to 12%.

　　In terms of personnel training, South Korea plans to train 150,000 semiconductor professionals by 2031. In addition, the Korean government will also focus on supporting the research and development of next-generation system chips, and raise the self-sufficiency rate of semiconductor materials, parts and equipment from the current 30% to 50%.

　　According to a report by Reuters on the 21st, semiconductors have been the largest export product of South Korea for nine consecutive years, and in 2021, semiconductors will account for about one-fifth of the total export of South Korea. At present, South Korea has Samsung and SK Hynix, the world’s largest memory chip manufacturers.

　　With the deepening of the proportion of semiconductor industry in South Korea’s trade and the increasingly fierce global semiconductor competition, South Korea is more eager to become the "leader" of semiconductor industry, and at the same time, it seeks the independence and stability of supply chain resources while seizing the technological highland. At the end of June, Samsung Electronics announced that it was the first in the world to realize the 3-nanometer process technology to make chips, and it was scheduled to be shipped on July 25th, one step ahead of its old rival TSMC.

　　According to a report in South Korea’s "Asian Economy" on the 20th, US Treasury Secretary Yellen delivered a speech during a visit to Seoul’s LG Chemical R&D Park on the 19th, saying that the United States and its allies should implement a "friend-shore outsourcing" strategy. This strategy aims to limit the production and trade of major commodities in the United States to "trustworthy countries". Yellen said in her speech that South Korea has continuously increased its investment in the United States in the fields of batteries and semiconductors, and the United States will continue to work closely with South Korea to establish a flexible supply chain.

　　LG Chem was the only company visited by Yellen during her visit to Korea. South Korea’s "Central Daily News" reported on the 20th that Yellen’s visit to LG Chem was not accidental. The LG Chem R&D Park she visited gathered a new generation of anode materials and separators and other future battery material research facilities. LG Chem is currently considering building a new factory in the United States, etc. Previously, the company had set up factories in Ohio and other places in the United States through LG New Energy, a subsidiary that produces batteries. LG intends to invest $11 billion in the United States to expand its battery supply network by 2025.

　　China market and raw materials are indispensable.

　　Behind South Korea’s determination to reach the top of the global semiconductor industry in an all-round way is the reality that the dependence on China in key areas has increased significantly in recent years. According to South Korea’s "Chosun Ilbo" reported on the 20th, the data released by the Korea Trade Association on the same day showed that through the analysis of about 1,200 kinds of goods in the import and export commodity classification system, it was found that 78 kinds of major imported goods in South Korea in the first half of 2022 were more than 80% dependent on China, which continued to increase compared with 72 kinds in the first half of 2021. In addition, among the main imported goods in South Korea, 253 categories are more than 50% dependent on China.

　　Specifically, in terms of raw materials and components, magnesium ingots (99.8% of which are imported from China), aluminum cables (98.9%), color steel plates (97.7%) and solar components (97%) are highly dependent on China. In addition, escalators, mice, rice cookers and other products are also more than 97% dependent on China. The dependence on China for electric trucks, dishwashers, drones and steam boilers exceeded 80% for the first time in the first half of this year. Some ingredients, such as garlic, red beans and peppers, are almost completely imported from China.

　　At the same time, the proportion of China products in Korean imported LCD monitors increased from 52.1% last year to 78.7%, and the proportion of vacuum cleaners and dryers also increased by about 10%. According to the report of Korea Operators Association, the largest proportion of South Korea’s total imports is intermediate goods (accounting for 50.2%), and the largest source of intermediate goods is China, accounting for 28.3%.

　　There are many kinds of similar goods, especially the raw materials for batteries needed in the "new energy transportation revolution" and the rare gases needed for chips, and several Korean giants can’t bypass China. A large number of raw materials for chemical products, including neon, a rare gas used in semiconductors, and lithium hydroxide, nickel and manganese as raw materials for batteries, are heavily dependent on China. In the first half of 2021, the proportion of "other fine chemical raw materials" imported by South Korea from China was 56.1%, which has risen to 64.2% in the first half of 2022.

　　"Dependence on Japan has decreased, but dependence on China has increased. South Korea’s raw materials, parts and equipment still rely on overseas supply." Seoul Economy reported on the 20th that the data released by official website, the Ministry of Industry, Trade and Resources of Korea, showed that in the first half of 2022, South Korea imported raw materials, parts and equipment totaling 130.067 billion US dollars, of which 20.072 billion US dollars (accounting for 15.4%) were imported from Japan and 380.4 billion from China.

　　Chinese response

　　At the regular press conference of the Ministry of Commerce of China on the 21st, spokesperson Shu Jueting responded to the US government’s request that South Korea reply whether to join the "Chip Quadripartite Alliance" before the end of August, saying that the stability of industrial chain supply chain is a global issue of great concern to all parties at present. China believes that no matter what framework arrangement, it should be inclusive and open, not discriminatory and exclusive; We should promote the stability of the global industrial chain supply chain, rather than damage and split the global market. Under the current situation, strengthening the open cooperation of industrial chain supply chain and preventing fragmentation is beneficial to all parties concerned and the whole world.

　　Shu Yuting said that in the first half of this year, the bilateral trade volume between China and South Korea reached US$ 184.25 billion, a year-on-year increase of 9.4%. Against the background of the fragile recovery of the global economy, the trade between China and South Korea has maintained rapid growth, which fully shows that the economies of the two countries are highly complementary and fully demonstrates the resilience and potential of bilateral economic and trade cooperation.

　　Lv Chao, chief researcher of North Korea and South Korea Research Center of Liaoning Academy of Social Sciences, said in an interview with Global Times on the 21st that semiconductors are an industry with a high degree of global division of labor and cooperation, and no one or even several countries can cover the whole industrial chain. In the global semiconductor supply chain, each region has different advantages and depends on each other. Lv Chao believes that even if the "four-party alliance of chips" advocated by the United States can finally take shape, it will not form a complete industrial chain. China has its own advantages in semiconductor production and semiconductor raw materials.

　　Jin Taiji, a professor of economics at Tankook University in South Korea, said that South Korea’s dependence on key areas of trade with China is too high. If there is a trade war between China and South Korea in the future, South Korea’s core industries such as semiconductors and new energy batteries may face collapse.

　　"The United States proposed the Semiconductor Quadripartite Alliance and ‘ Friendly shore outsourcing ’ What is South Korea’s China strategy? " South Korea’s "Korean News" published an editorial on the 20th, saying that the United States is continuing to push the global supply chain to restructure with its own country as the center, and South Korea is facing increasing pressure. The intention of the United States to exclude China from the global supply chain is more and more obvious. The anxiety of Korean industry is obvious.

　　Cui Taiyuan, president of South Korea’s SK, recently publicly stated: "Whether you like it or not, China is a fairly large market, so giving up is not an option." The editorial stressed that South Korea, as an open trading country, must adhere to the principles of free trade and multilateralism in order to maximize national interests.