The US is trying to convince Asian tech companies to join a huge semiconductor supply chain, one that does not include China.
The US is seeking to establish an alliance for the supply chain of semiconductors to prevent China from accessing the latest technology. (Reuters)
The moment Nancy Pelosi, the US House speaker, arrived in the American bases for military on the border of South Korea on August 3 There was a lot of speculation that she would be treated to a lavish red carpet reception. However, she was according to one report, snubbed.
South Korean President Yoon Suk-yeol was not interrupted during his time in Seoul in the comfort of his residence in Seoul. His foreign minister wasn’t there to meet with the US lawmaker as well.
Pelosi was on a wild tour around Asia. Her controversial visit to Taiwan during a time of increased tensions with China led to angry protests from Beijing.
However, even though Yoon spoke with Pelosi via phone one day later many believed that the actions of the South Korean leadership as an attempt to calm China.
Seoul’s ability to manage relationships with its main allies in the military – the US as well as its main commercial partner China is being tested in the context of joining the “Chip 4” alliance.
Here’s everything you need to be aware of the alliance.
The Big Four
In everything from iPhones or Playstation gaming consoles all the way to Dell laptops as well as Tesla electric vehicles – today’s electronics rely upon semiconductors (chips) to control their complicated tasks.
A lack of chips during the Covid-19 pandemic slowed down the production of several products, and sparked an argument in the US regarding its dependence on imports of chips.
US president Joe Biden recently signed the Chips and Science Act, that sets aside tens billions of dollars to help encourage companies to establish design and manufacturing factories across the US.
It is believed that the US, Taiwan, South Korea and Japan provide the majority of worldwide demand for semiconductors. They have the majority of the capability to develop, manufacture and test small chips.
The Taiwanese company TSMC is the biggest contract chip manufacturer, with Apple as well as Nvidia as customers.
Taiwan is a small island, depends on US financial and diplomatic support to fight away from China.
Beijing considers Taiwan as an integral portion of their territory which most of the world accepts. A few small nations consider Taiwan as an independent nation. Even the US is a part of its One China policy and hasn’t accepted Taiwan as an independent nation.
Beginning in the beginning of August, the Chinese military was conducting live-fire drills in the vicinity of Taiwan which comprised the usage of advanced jets and naval vessels.US House Speaker Nancy Pelosi didn’t receive the reception in South Korea that many had believed they would receive. (AP)
The concept of the alliance
The US accuses China of stealing intellectual property from American and western companies such as the technology used to create windmills’ turbines.
In the past few years, multiple US administrations have put restrictions on the technology of advanced products available to China and aims to increase the technological supply chain rather than being considered the world’s largest contract producer.
What sparked concern to alarm Washington concerned China’s fast takeover in the marketplace for the 5G network. The Shenzhen-based Huawei is the sole owner of 5G patents, and is facing an intense US attempt to stop its growth.
Experts believe China has made it mandatory for foreign firms to share patent information with local joint venture partners.
The World Trade Organisation (WTO) prohibits the use of forced technology transfer as a condition to allow access to markets.
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Western businesses that want to market their products in the fastest-growing market everything from electric vehicles to solar panels usually opt to be in the shadows.
China’s president Xi Jinping has vowed to concentrate on technology development and assist manufacturers in advancing the tech supply chain.
The so-called “Chip 4” alliance seeks to strengthen cooperation among its members on development and production of high-end semiconductors.
It’s possible that the US as the home to tech giants from around the world like Intel and Google is likely to persuade Taiwan as well as Japan to join its supply chain for semiconductors when leaders gather to launch the process later in the month. But wooing South Korea is another story.
Is it possible for South Korea join the alliance?
President Yoon has attempted to minimize the concern Yoon has tried to minimize the concerns, saying Seoul will only do what is best for the nation’s interest. The government has informed the US that it would be participating in the initial meeting, but hasn’t yet given all-out support for the idea.
“The government is examining the issue from the point of view of national interests. The relevant government agencies will investigate and debate the issue in order to protect the interests of the nation. There is no need to fret about it too much,” Yoon said.
China is the largest source of revenue in the world for South Korean semiconductor makers Samsung and SK Hynix.
In South Korea’s exports of memory chips, which totaled $69 billion by 2021, approximately 40 percent was sent to China. Include Hong Kong to the export number and the percentage increases to 60 percent.
Korean businesses depend on Chinese companies to source important ingredients used in chip production.
Samsung’s sole overseas memory chip plant is located in Xi’an and is responsible for about 40% of Galaxy phone manufacturers NAND flash production.
“Like whether or not you like it, China has a huge market and leaving it is not an alternative. We should continue to work economically with Chinawhenever possible, and moving forward on this,” SK Group Chairman Chey Tae-won spoke at an event for press.
SK Hynix, which has manufacturing facilities located in Wuxi, Chongqing and Dalian It has struggled to upgrade its facilities with advanced equipment including ultra-violet lithography equipment since the US prevented its exports to China.
