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US-China tech war
ChinaDiplomacy

Will South Korea’s chip sector have to take sides in the China-US tech war?

  • Under Moon Jae-in, Seoul has charted a middle course between its biggest semiconductor market and its traditional military ally
  • But that could change if a conservative candidate wins the South Korean presidency, observers say

Reading Time:5 minutes
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Illustration: Lau Ka-kuen
Laura Zhouin BeijingandEduardo Baptistain Hong Kong

This is the first in a two-part series on the potential impacts of presidential elections in the region on relations with China and the United States. Here, Laura Zhou and Eduardo Baptista examine the challenges a swing in the electoral pendulum could pose for South Korea’s semiconductor industry.

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On the one side is China, the biggest market for computer chips from South Korea, which controls more than half of the global market for semiconductors.

Semiconductors are crucial to almost every industry in the modern economy, from mobile phones to cars and defence facilities, and in March alone, China, including Hong Kong, accounted for 60 per cent of South Korea’s exports of the products, according to Seoul’s Ministry of Trade, Industry and Energy.

On the other side is the United States, a traditional military ally and owner of many of the semiconductor technologies that have helped transform South Korea into a hi-tech powerhouse.

Samsung, for example, is a leading world player in mobile processor design, but the key technologies, from the core semiconductor intellectual property to design software and fabrication tools and materials, are dominated by US companies.

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Over the last four years under its president, Moon Jae-in, South Korea has been able to find a middle way between the two, balancing its economic reliance on China with its long-standing ties with the US by pursuing a policy of strategic neutrality. The policy has enabled South Korea to improve its ties with China after the strains of Moon’s conservative predecessor and avoid the zero-sum game between the US and China.
But with Moon’s nonrenewable five-year term set to end next year and his liberal Democratic Party of Korea taking a beating in bellwether mayoral elections, the country’s tech industry could come up under greater pressure to take sides in the tech war between China and the US, observers say.
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