South Korea is expected to be increasingly torn between the United States and China over the issue of microprocessors, as its chip-making powerhouses closely watch Washington’s move to increase domestic chip production in response to a global shortage. The US still leads the world in chip design, but it has largely ceded the manufacturing of semiconductors - vital to products from smartphones to cars and trucks - to companies in Taiwan , South Korea, Japan and mainland China. But US President Joe Biden is now looking to provide US$50 billion in funding for semiconductor production and research to address a global shortage that has idled carmakers worldwide and affected producers of other electronic devices and to match China’s own investments into shoring up the semiconductor supply chain. His proposed legislation has bipartisan support from Congress. Kim Yang-paeng, senior researcher at the Korea Institute for Industrial Economics and Trade, said Korean chip makers would be concerned about Washington’s move to increase chip production in the US. Samsung and SK Hynix together control more than two-thirds of the market for memory chips that handle an ever-expanding sea of data, while in Taiwan, Taiwan Semiconductor Manufacturing Company (TSMC) supplies processors that power Apple’s iPhones and Google’s artificial intelligence technology . “The US will be able to increase production in a few years’ time as it has the technology but this would certainly result in a global supply glut and prices taking a downward spiral,” Kim said. “This possibility gives semiconductor chip manufacturers a great headache,” he added. This possibility gives semiconductor chip manufacturers a great headache Kim Yang-paeng, Korea Institute for Industrial Economics and Trade Kim said South Korea would increasingly face a “dilemma” of how to cater to China, its dominant market for exports, while keeping the US, its security ally and the country holding the patent for manufacturing semiconductors, happy. South Korea’s semiconductor exports stood at US$99 billion in 2020, 60 per cent of which went to China and Hong Kong , he said. TSMC and Samsung were among the companies invited to a White House discussion on Monday when Biden described his proposal, and this was widely seen by observers as an implicit message they should build more plants in the US. Samsung is reportedly considering ploughing US$17 billion into a new chip plant in Austin, Texas, in addition to its foundry factory there. China has also been calling for South Korean companies such as Samsung – which has a NAND Flash memory plant in Xian and semiconductor packaging plant in Suzhou – to expand cooperation in technology including semiconductors, a request made by Foreign Minister Wang Yi when he met his South Korean counterpart Chung Eui-yong in Xiamen, Fujian province, this month. Both sides have been working to rebuild ties following a fallout in 2016 over the installation of the US THAAD anti-missile system on South Korean soil, with analysts saying Seoul’s geopolitical value to China has increased of late. A visit by Chinese President Xi Jinping to South Korea is on the drawing board Kim, the researcher, said despite the pressure from the US and China, he did not think political considerations would have a big influence on the chip makers’ long-term investment plans, worth tens of billions of dollars. But even if South Korean companies wanted to work more closely with China, there would be challenges due to US restrictions on its technology and the feared global supply glut. Chips are down for Taiwan. ‘Where the bloody hell’ is Australia? On Tuesday, Chinese telecoms equipment maker Huawei Technologies held a press conference in Seoul where its senior officials said it hoped to cooperate with chip makers in South Korea, Japan and Europe to secure a global chip supply chain. Semiconductor imports by China surged to an all-time high in March, with the country buying 58.9 billion semiconductor units worth US$35.9 billion, a new monthly high for the category, according to data released by the General Administration of Customs. Huawei was last year put on an export blacklist by the US as part of a move to restrict the access of Chinese companies to critical technology originating from the US. The move sent Chinese companies rushing to stockpile three to six months worth of semiconductors amid fears of similar action against them, leading to a global chip shortage. It also put Huawei’s handset business, once regarded as one of the top three smartphone makers after Apple and Samsung, under immense pressure. Sun Luyuan, CEO of Huawei Korea, expressed hope at the press conference that Huawei could work more closely with Korean companies to overcome US sanctions, pointing out that Huawei had been a “big partner” to chip makers Samsung Electronics and SK Hynix. “For the past five years, Huawei’s accumulated purchases from Korean firms amounted to US$37 billion. We also created various job positions and helped local partners speed up R&D activities,” Sun said. Sun suggested Huawei Korea was open to building a research and development centre there, a move which would tap into Seoul’s own plans to increase investments in artificial intelligence and fifth-generation (5G) telecommunications services. With its cutting-edge 5G network products, the company aimed to support the country to achieve the goal, Sun said. “Huawei is highly complementary to such a drive and we are actively seeking to support Korea’s digital economic development,” Sun said.