Tech war: South Korean trade group calls for chip diversification from China as Seoul mulls joining US-led semiconductor alliance

A trade group in South Korea has called for the diversification of trading partners in chips after Seoul’s reliance on China as a semiconductor export market jumped nearly 13-fold over the last two decades.

China accounted for 39.7 per cent of all South Korean semiconductor exports in 2021, up from 3.2 per cent in 2000, according to an article by The Korea Herald on Sunday, citing research published by the Korea Chamber of Commerce and Industry (KCCI), which represents 300 local companies including memory chip giants Samsung Electronics and SK Hynix.

The Seoul-based trade group cited the risks of increasing dependency on China, warning that it would badly hurt South Korean industry when the manufacturing skills gap between the two countries narrows.

The findings come at a time when Seoul is trying to walk a delicate balance between maintaining access to the China market while joining the US-led Chip4 alliance, seen by Beijing as a plot to marginalise China’s role in semiconductor value chains.

South Korea is expected to attend a preliminary meeting of the Chip4 group, which includes Japan and Taiwan as members, Reuters quoted Seoul’s foreign minister Park Jin as saying last Thursday.

Total exports from South Korea to China barely rose in the first 20 days of August, according to customs data released on Monday. Notably, total shipment volume in the same period fell 11.2 per cent from a year earlier.

South Korean companies are important suppliers of memory chips for China’s smartphone makers. Samsung and SK Hynix, which have made hefty investments over the years to build wafer fabs in China, are facing increasing competition from rising Chinese memory chip players such as Yangtze Memory Technologies Corp and ChangXin Memory Technologies.