Samsung, SK say their investment strategies not affected by geopolitical issues

By Kim Yoo-chul

South Korea's official joining of the U.S.-led Indo-Pacific Economic Framework (IPEF) could possibly jeopardize Seoul's long-standing strategic partnership with Beijing, as the core purpose of the IPEF is to counter China's growing economic and political influence in Asia.

The rationale behind such concerns was illustrated early by a series of recent remarks by Chinese Foreign Minister Wang Yi, who has expressed his dissatisfaction with the launch of the economic framework, which excludes China. Wang said in his May 16 videoconference with Korean Foreign Minister Park Jin that China doesn't want to see "technological decoupling" through the launch of the IPEF.

But because the prime goal of the IPEF is aimed at ensuring supply chain resiliency, the point of which is also embraced by China, given Beijing's continued heavy investment into the semiconductor industry, experts and executives at Samsung and SK ― the world's top two chip manufacturers ― said Seoul's participation in the IPEF will help domestic tech companies deepen their "dual-track" strategy for dealing with both the United States and China.

The Joe Biden administration is continuing the former Donald Trump administration's economic "decoupling" strategy to reduce U.S. reliance on Chinese imports and supply chains. Decoupling from China will cost a lot and China still lags far behind in the race for semiconductors, for example, when it comes to the level of tech being applied to manufacture advanced microprocessors, according to experts.

"The point is that China still has to rely on technology support from foreign companies in batteries and semiconductors, the industries which the country has identified as strategically important. Interestingly, because of South Korea's joining of the IPEF, China is expected to offer more incentives and benefits for Korean semiconductor and battery manufacturers doing business there," said Jeon Byeong-seo, the director of the Institute of Chinese Economic and Financial Research. China accounts for a 63-percent market share of the global consumption of semiconductors as of May of this year, according to estimates by market research firms.

The world's top memory chip manufacturer, Samsung Electronics, said it is on track to manufacture a massive quantity of chips with finer 3-nanometer processing technology. Its existing semiconductor plant in Austin, Texas, has been fully operational to manufacture chips with highly advanced technology, while its new chip plant, to be built in the city of Taylor, near Austin, will also be assigned to handle chips with premium technology. SK hynix, the world's No. 2 chipmaker, is investing heavily in the United States with a huge focus on high-end semiconductor technologies.

Washington's priority is banning Chinese tech companies from buying parts and components from U.S. companies or those of its allies, for use in manufacturing cutting-edge products, without its approval.

"In the case of semiconductors, a lot of Chinese companies are still relying on less-advanced 20-nanometer-level processing technology as the mainstream tool for semiconductor production. This level of technology is classified as a second-tier technology. However, Beijing's concern is how to shield itself from Washington's economic squeeze by announcing extra billion dollar investment plans in the semiconductor industry. Samsung and SK will benefit a lot," a former high-ranking trade ministry official said in a brief telephone interview.

The precondition to make the decoupling strategy actually happen is to get more countries currently maintaining a high level of economic partnership with China into an alternative U.S.-led economic bloc. But the point is not many countries are ready right now to follow suit. Plus, Europe and Asia do not necessarily want to see a decoupling from China because doing so would undermine the competitiveness of their companies and could slow economic growth.