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The Peninsula

South Korea Benefits from U.S. Strategic Interest in Chips

Published April 23, 2021
Author: Korea View

What Happened

  • On April 12, President Biden met with 19 CEOs to discuss the ongoing semiconductor shortage and to build support for technology as a key component of the infrastructure.
  • The White House promised a USD 50 billion investment in U.S. semiconductor manufacturing, seeking cooperation from global partners.
  • During a similar summit in March, Biden discussed putting technology, such as semiconductors and AI, at the center of its security strategy towards China, and Asia as a whole.

Implications: Geopolitical competition between the United States and China fosters opportunities for South Korean commercial interests. This is particularly true for South Korean tech companies with operations in the United States. Even before the current chip shortage, the U.S. government had repeatedly identified the semiconductor industry as a critical asset for both the country’s long-term economic growth and its security. China’s growing investment in the semiconductor industry further spurred the U.S. government’s focus in this sector. In an effort to safeguard the domestic supply, the Biden administration urged South Korean chip manufacturer Samsung to expedite the USD 17-billion expansion of its manufacturing facility in the United States. With USD 50 billion set aside from the Biden administration’s infrastructure plan to foster the expansion of domestic semiconductor production, South Korean chipmakers with a presence in the United States like Samsung have an opportunity to potentially reap monetary and regulatory benefits.

Context: U.S. strategic concerns vis-à-vis Japan in the 1980s acted as a catalyst for the emergence of South Korea’s semiconductor industry. In the 1970s, Japan emerged as a key player in this sector, taking up 75% of the dynamic random-access memory (DRAM) market by 1986. In comparison, the U.S. market share of DRAM went from 70% in 1978 to 20% by 1986. In response, the U.S. government placed tariffs on Japanese semiconductor imports, which led to a decline in the global DRAM supply and an increase in prices. The resulting demand for chips encouraged South Korea’s nascent semiconductor industry to accelerate its growth and expansion into the U.S. market. Today, Taiwan’s TSMC and South Korea’s Samsung collectively manufacture 70% of the world’s chips.

This briefing comes from Korea View, a weekly newsletter published by the Korea Economic Institute. Korea View aims to cover developments that reveal trends on the Korean Peninsula but receive little attention in the United States. If you would like to sign up, please find the online form here.

Korea View was edited by Yong Kwon with the help of Melissa Cho and Alexandra Langford. Creative Commons image from Flickr account of Denis Dupont

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