Tech war: China’s position in global chip supply chain to weaken as South Korea closely aligns its interests with Japan and US, analysts say
- Closer ties between South Korea and Japan highlight the increased US pressure on China’s semiconductor industry
- That is expected to accelerate the process of China becoming marginalised in the production of advanced chips and in global supply chains
In the first visit in 12 years of a Korean head of state to Japan, Yoon is also expected to convince Tokyo to drop export controls on chip-making materials to South Korea and align their positions on supply chains.
The anticipated reconciliation between South Korea and Japan as a result of Yoon’s state visit will accelerate the process of China becoming marginalised in the production of advanced chips and in global supply chains, according to Park Ki-soon, a senior adviser and expert in China’s economy at Seoul-based law firm Dentons Lee.
South Korea to ask US to let chip makers keep investment in China
“If South Korea-Japan relations are normalised, it would significantly help [Korea’s] imports of semiconductor material, components and equipment,” said Kim Dae-jong, a business professor at Sejong University in Seoul. “That [trade] can recover to pre-2019 levels.”
But decoupling from China is expected to lead to hefty losses for South Korea.
“Twenty per cent of South Korea’s total exports are chips, and 60 per cent of these are exported to China,” Kim said. “If South Korea follows the US, it could lose up to 50 trillion won [US$37.89 billion] worth of investments in China.”
South Korea stands to gain from US chip alliance against China
China’s imports from South Korea shrank 29 per cent in the first two months of this year, according to Chinese customs data. The country’s imports from Taiwan fell 30.9 per cent and imports from Japan declined 23.1 per cent over the same period, signalling accelerated decoupling between China and its neighbours.
There could be more bad news for Beijing next month, when Yoon goes on a state visit to the US. He will meet Biden at the White House for a bilateral summit, which is expected to include discussions on security and economic ties between the two countries.