TOKYO – China plus South Korea have agreed to establish a brand new Collaborative Supply Chain Council to address any kind of disruptions of their intensive and interdependent economic relationship in a timely fashion.
In what could be taken as pointed irony, the particular Dong-A Ilbo reported that “With the particular supply chain reform beginning in earnest directed by the US, this is a conclusion from an in-depth discussion in between economic ministers associated with China and Korea…”
The new supply chain contract was reached in the 17th South Korea-China Meeting on Economic Cooperation held upon August 27. The meeting also resulted in MOUs on additional aspects of economic collaboration between the two sides, including joint tasks in third nations.
China’s Worldwide Times noted that will “South Korea needs a stable Chinese marketplace to export the key products and The far east also needs Southern Korea for industrial development. ” It quoted
Da Zhigang, director from the Institute of Northeast Asian Studies in Heilongjiang Provincial Academy of Social Sciences, as saying, “Seoul showed it desired to maintain mutual believe in and steady cooperation with Beijing within industrial chains and provide chains in the face of pressure by the US from the ‘Chip 4’. ”
Sounding some caution, he additional, “Although the latest agreements are highly promising for solidifying bilateral cooperation in provide chains and seem to assure China there are no misunderstandings regarding its possible participation in the US-led chip alliance, we still need to wait and see the real actions of Southern Korea. ”
Nick 4 is an ALL OF US government initiative aimed at forming a semiconductor industry alliance with Japan, South Korea and Taiwan in order to coordinate efforts in supply chain administration, R& D, financial aid and other aspects of the company. Widely regarded as an effort to exclude and contain China, it also raises questions concerning trade secrets and competitive advantage.
On the encounter of it, securing sufficient supplies of semiconductors should become continuously easier and cheaper as record funds spending translates into improved chip-making capacity while recession at the same time undercuts demand. The semiconductor shortage, which grew to become a huge problem just for industry (particularly the auto industry) and a world-changing political problem at the height from the Covid-19 pandemic, may even turn into a glut.
As can be seen from your chart below, the year-on-year change in semiconductor billings (sales) reported by WSTS (World Semiconductor Trade Statistics) turned damaging in July, right after two and a half many years of growth. Sales of semiconductor production machines continued to rise as record orders fed through to shipments plus installations, but only at single-digit prices.
DRAM plus NAND flash memory space spot prices were falling for most of the year. At the end of 06, Micron, the largest United states memory chip producer, announced, “immediate motion to reduce our supply growth trajectory” due to a “significant reduction” in demand for consumer electronics, which includes PCs and mobile phones.
Micron could be the world’s third-largest DRAM maker after Samsung Electronics and SK hynix and the fourth-largest NAND flash storage maker after those two Korean companies and the joint venture in between Japan’s Kioxia and America’s Western Digital.
But there is more to supply chain safety than supply, requirement and pricing. Korean memory makers Samsung Electronics and SK hynix also encounter another problem that will runs head-on in to the US government’s determination to hamstring China’s technological advance, specifically their large existence in and higher degree of dependence on China and taiwan for their business plus revenue.
In 2021, almost 40% of South Korea’s semiconductor exports went to China, based on the Korea Chamber of Commerce and Market, up from only 3% in 2000. Moreover, Samsung makes about 40% from the NAND flash storage in the Chinese associated with Xian at the world’s largest NAND expensive memory factory. SK hynix makes MASS in Wuxi and it has bought Intel’s NAND flash operations within Dalian.
At the same time, South Korea depends on Chinese components for its exports to other markets, notably the US. Just like be seen in the chart below, there is a near relationship between China’s exports to South Korea and Southern Korea’s exports towards the US.
America’s own electronics supply chain depends each directly and not directly on China. It really is unclear whether or not the ALL OF US Commerce Department offers thought through all the implications of restrictions on China.
US government sanctions on the export of advanced semiconductor creation equipment to Cina could make life difficult for Samsung, which usually faces rising competition from Chinese NAND flash maker Yangtze Memory Technologies.
The US has already obstructed the shipment of advanced extreme ultraviolet (uv) (EUV) lithography tools from the Netherlands’ ASML to Wuxi, where about half of the DRAM sold by SK hynix is made. In case those factories can not be upgraded, they will eventually lose competitiveness.
Which increases the critical issue: Is US policy aimed at controlling Cina, South Korea, or even both? The answer is that the US government would like all three from the proposed Chip 4 Alliance partners – South Korea, The japanese and Taiwan – to turn their interest away from China plus back to the US, no matter what losses they might incur. To some degree, through subsidies provided under the POTATO CHIPS Act, it is willing to bribe them to do this.
R& Deb is a different issue. Protecting intellectual real estate is a common curiosity and defense against China’s light-fingered approach to trade secrets and practice of employing away experienced technicians could benefit from discussion and coordination. But the Koreans, Japanese plus Taiwanese might also have got issues with technology-sharing plus joint R& Deb projects directed from Washington, DC.
Korean, Japanese plus American companies compete in memory potato chips and Samsung competes with the Taiwanese and Intel in the foundry (contract manufacturing) marketplace. So why would they wish to share their R& D with market competitors? Fears happen to be expressed, notably within Korea, that Nick 4 might channel East Asian technology to Intel plus Micron.
On the other hand, the four also collaborate and depend on each other. Intel will be both a competitor and a customer associated with Taiwan Semiconductor Manufacturing Company (TSMC), which recently became a joint venture partner of Sony. Without Western equipment and materials (e. g., photoresists ), none of them would be making much of anything.
That simply leaves the inconvenient undeniable fact that China is the world’s largest market for semiconductors and, at least recently, the largest marketplace for semiconductor production equipment. All players thus have a great deal to lose from reducing off the Chinese, which includes American fabless IC design companies (e. g., Nvidia), integrated device manufacturing companies (e. g., Intel), plus makers of semiconductor production equipment (e. g., Applied Materials).
Caught among a rock and hard place, the Koreans appear to be comforting the Chinese prior to negotiating a non-threatening membership in America’s Chip 4 effort. Japan is likely to take a similar but lower-profile approach.
Taiwan has reportedly currently agreed to join but is unlikely to put its enormous consumer electronics trade with Tiongkok at risk. American technology companies will defend their own interests in consultations with the ALL OF US Commerce Department.
Chip 4 can therefore turn out to be a lot more political rhetoric than substance. Or, in combination with sanctions already enforced (and probably a lot more to come), it might place obstacles in the path of China’s semiconductor industry that could take years in order to overcome. This would be a major setback for China’s data processing, artificial intelligence and defense industries – exactly what the US government hopes to achieve.
How may the Chinese react? Direct or asymmetric economic retaliation – such as boycotts of Korean or Western products, which has been implemented in the past – any possibility. Redoubling efforts to develop their own technologies, with even less concern for foreign IP than they have got demonstrated so far, is almost guaranteed.
Or maybe the issue could be conflated with the larger geopolitical struggle between the ALL OF US and China. Within August, US Home Speaker Nancy Pelosi’s visit to Taipei activated massive Chinese military exercises that controlled a blockade associated with Taiwan. Seeing the window of opportunity starting to shut, China might choose to implement the real thing.
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