Samsung veteran warns Korea is losing global chip war

Samsung veteran warns Korea is losing global chip war

(Bloomberg) – In three decades at Samsung Electronics Co., Yang Hyang-ja helped shape the 84-year-old conglomerate’s current dominance in global memory chip manufacturing. Now she’s taking on a much broader challenge: making sure Korea stays relevant while the US and China bicker over semiconductors.

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Yang, who rose from a research assistant at the long-established company before heading up the key division for memory chip development, is the lead architect of a nationwide effort to fund and boost its domestic chip industry. Her mission is gaining momentum as the US, China and Japan pour billions into building their own chip supply chains and cloud Korea’s future role in semiconductors, she told Bloomberg Television.

It’s a matter of national security, she said, echoing the views of those in Washington and Beijing who are pouring talent, money and political support into developing the silicon chips that will power future technologies from artificial intelligence and the metaverse to next-generation computing and – especially – military capabilities.

“We’re in a chip war,” Yang said in a December interview. “Technological superiority is a way by which our country can take the lead in any security-related agenda, such as diplomatic and defense-related issues, without being influenced by other nations.”

Yang, who heads a 13-member special committee of President Yoon Suk Yeol’s ruling party formed this year to find a solution, has argued that only through strong and direct intervention will Seoul secure its position in the $550 billion global semiconductor industry can expand. She is among a growing number of global policymakers who have embraced tech protectionism after pandemic-related logistics problems highlighted countries’ interdependence for key electronic components. She has gained an ally in Yoon, who joins Yang’s calls for more policies to help the country’s native chip sector, which includes SK Hynix Inc. and Samsung.

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But their efforts were unsuccessful. Last month, Parliament passed Korea’s version of the US Chips Act. Led by Yang, the move speeds up the approval process for building factories in the metro area while increasing the number of schools specializing in engineering. Separately, Parliament passed a bill that would give big companies investing in semiconductor manufacturing an 8% tax credit, far less than Yang’s proposal of 20% to 25%.

These gestures are a far cry from the billions of dollars in subsidies other countries allocate to chip production, Yang said, adding that short-term political interests blind MPs in the National Assembly. On the other hand, some of their colleagues have argued that overly generous stimulus would threaten public finances and only benefit large companies.

More Korean companies could move their major manufacturing facilities to the US and take their best engineers with them, she said. Samsung plans to build a $17 billion semiconductor fab in Texas and has raised the prospect of spending nearly $200 billion on a series of plants in Austin and Taylor.

Korea has a unique opportunity to buck this trend, Yang said. Taiwan — where Taiwan Semiconductor Manufacturing Co. is based — produces most of the high-end chips that power the latest iPhones, servers, and supercomputers. This has sparked global calls to diversify production away from an island that China has claimed and threatened to invade.

“Samsung is the only company in the world that can step in for TSMC,” Yang said.

Yang, who first entered politics in 2016 at the encouragement of former President Moon Jae-in, has chaired the current ruling party’s special committee on semiconductors. She is an independent lawmaker, having left the Democratic Party in 2021 amid criticism for her response to a sexual assault case against one of her aides, who was also a relative. Yang later apologized. A police investigation found no charges against the legislature.

Chip politics today takes up their time. Escalating sanctions on advanced technologies are increasing pressure on the country to choose between the US, its security ally, and China, its largest trading partner. Both have asked South Korea to expand chip production partnerships.

But Seoul has dodged explicit comments regarding its involvement in the Biden administration’s sanctions on exports of US-related know-how to China.

This thorny situation highlights the need for Korea to build its own technological capabilities domestically — or risk becoming increasingly indebted to foreign powers, Yang said.

This is the time to give Korean companies more incentives to build manufacturing capacity domestically rather than abroad, Yang said. The country must do more to retain young talent, she said.

“How else would our country survive?” she said. “It would become a new technological colony.”

–Assisted by Emily Yamamoto.

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