What the Chip 4 Controversy Has Left Us

A one-month period of indecision over a working-level meeting.

Excessive fear makes South Korea easy prey for Chinese threats.

“A win-win situation should be maintained in safeguarding a stable and smooth supply chain and industrial network.”

On Aug. 9, at his meeting with the Korean Foreign Minister Park Jin, Chinese State Councilor and Foreign Minister Wang Yi gave the above response when he was notified of South Korea’s decision to participate in the Chip 4 alliance. Analysts say that South Korea has done well considering that there were concerns that China would retaliate economically if South Korea participated in the U.S.-led alliance.

While the Korean government has deliberated over joining Chip 4 for nearly a month, there is hardly a discussion about the issue in the U.S., which invited South Korea to the alliance. One official from a U.S. semiconductor company stated that they first heard of Chip 4 through South Korea. So, what happened?

A year ago the U.S. proposed that South Korea become a part of the semiconductor supply chain alliance now known as Chip 4. During this time, President Joe Biden personally invited Samsung Electronics and other major semiconductor companies to the White House to advance his semiconductor policies. As the Department of the Treasury took the lead by promoting the CHIPS and Science Act, the State Department pushed for strengthening semiconductor cooperation with global allies and came up with the idea of a supply chain network involving South Korea, Japan and Taiwan.

But as President Biden’s priority was to support the domestic semiconductor industry, this plan did not make much progress for nearly a year. The idea emerged again when President Biden decided to visit countries in Asia, including South Korea.

According to an official in the U.S. semiconductor industry, the Chip 4 meeting in early September is unlikely to deal with sensitive topics such as semiconductor alliances because it is a working-level meeting mainly involving managers to train semiconductor workers and share information on R&D investment. “Along with the ongoing, fierce competition between the semiconductor industries of South Korea, Japan, and Taiwan, there are limitations on what the four countries can discuss together in public,” a source said. “Key agendas such as the semiconductor alliance plan are likely to be handled by bilateral negotiations.”*

It is fairly evident in many ways that the Biden administration is envisioning a semiconductor alliance to keep China in check. At a time when U.S.-China tensions are growing in all directions, it is certainly important to prevent damage to Korean businesses by carefully weighing national interests.

Nevertheless, the Korean government’s response to the Chip 4 alliance controversy was rather disappointing. When it was revealed that the U.S. invited South Korea to participate, the government went into a long period of indecision instead of clarifying the details. Among the public, meanwhile, Chip 4 has emerged as the symbol of a U.S.-led semiconductor alliance plan, even leading to Chinese state media threatening to launch economic sanctions against South Korea if it joins Chip 4.

It would be unreasonable to think that China, which has been paying keen attention to every move made by the U.S., is unaware of the true purpose of Chip 4. Going one step further, I suspect that excessive fear of China’s economic retaliation may have made South Korea “easy prey” for threats. While the Korean government was struggling with the issue, Japan secured a joint semiconductor research agreement with the U.S. Taiwan took an even bolder step by announcing the commencement of “21st Century Trade Initiative” negotiations. Yet neither became targets of China’s economic retaliation.

Above all, it is questionable whether South Korea should ask for China’s understanding to participate in one working-level meeting, especially considering that the leaders of South Korea and the U.S. have already released a joint statement to expand cooperation in the semiconductor supply chain. If you spend time overthinking in the middle of a heavy storm, you will be swept away by rain and wind. The war for economic hegemony between the U.S. and China has just begun.

*Editor’s Note: This quote, while accurately translated, could not be sourced from an original English-language source.