US-China tech war: Seoul walks fine line as Washington puts pressure on South Korean firms’ chip manufacturing on mainland

Relations between Beijing and Seoul, especially in the field of semiconductors, could soon be put to a test, as Washington dangles nearly US$53 billion in incentives to lure more chip manufacturing to the United States, threatening China’s access to advanced technology and its role in global supply chains.

South Korea wants to strike a delicate balance between the policies of its two large trading partners, while helping memory chip giants Samsung Electronics and SK Hynix steer clear of geopolitical conflicts that may damage their business interests, according to a Korean expert familiar with Seoul’s policies who declined to be identified.

Pressure from Washington, however, is expected to increase after US President Joe Biden on Tuesday signed into law the Chips and Science Act, which earmarks nearly US$53 billion in semiconductor manufacturing incentives and another US$200 billion for research into artificial intelligence, quantum computing and other advanced technologies – areas that Beijing has designated as national priorities.

That law’s passage could bolster Washington’s efforts to form the so-called Chip 4 Alliance, a partnership that includes South Korea, Taiwan and Japan. Beijing sees this alliance as a plot by the US government to exclude China from global semiconductor supply chains.