Is the U.S. proposal for a chip-four alliance negative for Korean semiconductors?

On the news above yesterday, many people saw concerns about the small head of the Chinese semiconductor division in Tele and Blog. The main focus of the news is the U.S. government's proposal to form a Chip Four alliance with South Korea, Taiwan, Japan and companies, which appears to be led by the U.S. to exclude China from the semiconductor supply chain.

​

I will write down my very personal opinion on this. For your information, please read carefully that there is a bias in the position of companies exporting semiconductor equipment to China.

​

The reason why the U.S. proposed semiconductor alliances to Korea, Taiwan, and Japan in the news is that Korea has huge memory companies such as Samsung and Hynix, Taiwan has huge foundry companies such as TSMC and UMC, and Japan has unique semiconductor materials, parts and equipment.

​

Currently, the U.S. prohibits ASML's export of EUV exposure equipment to China, and China is unable to bring ASML equipment into its own country, even foreign companies such as Samsung and Hynix, not Chinese companies, are unable to bring EUV into their fabs. These U.S. sanctions are currently under China's fleet process sanctions.

​

Then, does the United States really have the ability to impose sanctions on most processes, including legacy empty space, as well as the per-ship process?

​

Personally, I think so. Software and technology patents used in most equipment and parts, including domestic semiconductor equipment companies, contain many intellectual property rights in the United States. If the U.S. decides to do so, if the entire process is included in the regulation on semiconductor exports to China, domestic semiconductor small businesses will be hit hard.

​

However, I think there is a difference between having the ability and the environment in which they will be able to demonstrate the ability, or in such a time period. Let me briefly list whether the United States personally thinks that it is not an environment to impose sanctions on China outside of the fleet process.

​

​

1. China is a huge demand market for semiconductors worldwide.

China is the largest country in the world with the top five populations. However, it is also a country with a fast pace of decision-making and implementation of policies under the leadership of the Communist Party.

​

The U.S. and China, including China's announcement of the rise of semiconductors in 2014, are now seen as politically hostile in a win-win relationship between simply consumers and suppliers.

​

The problem is that the relationship between the U.S. and China is politically and economically complicated, with low-priced products produced through China's cheap labor force having a huge impact on U.S. consumer prices.

​

The U.S. semiconductor sanctions against China are currently in the fleet process. If the U.S. imposes sanctions on China's entire semiconductor process, overseas semiconductor companies, including all Chinese semiconductor companies, will not be able to produce semiconductors.

​

​

(As shown above, SMIC, China's leading foundry company, has less than 2% share of domestic semiconductor equipment. All semiconductor fabs, including foundry, must be closed when US semiconductor manufacturing is activated.)

​

Currently, China's memory and foundry companies rely on domestic demand such as their own IT, home appliances, and automobiles rather than overseas exports.


​

If the U.S. sanctions fail to meet its semiconductor demand, China's huge semiconductor consumer will have to import numerous memory and non-memory chips from abroad. If sanctions on the entire process of semiconductors in the U.S. begin, not only will China's huge chip demand rise, but the current shortage of semiconductors will be different.

(I don't think it's any different from the idea of a war if we don't sell semiconductor chips to China, not a semiconductor manager.) Because semiconductor chips are now treated as commerce such as iron ore and nickel.)

​

The U.S. is aware of this, so it seems that it is delaying China's semiconductor growth as much as possible by limiting the current part of China's semiconductor sanctions to the fleet process.

​

And rather, due to this conflict between the U.S. and China, various semiconductor companies, including China's SMIC and YMTC, are accelerating their tendency to reduce their dependence on semiconductor equipment in the U.S. And amid this trend, domestic companies that are recognized for their technology in the process are rapidly increasing their MS. For your information, few companies can replace AMAT, RAM Research, and TEL (Japan) in the U.S. in the entire process.

​

​

2. Can U.S. global semiconductor small businesses abandon the Chinese market?


​

All semiconductor process equipment around the world accounts for most of the market share by U.S. Domestic small businesses are really developing more than before, but they cannot be compared to American companies. Domestic small business owners were able to make a lot of progress because there was a forward company called Samsung SK Hynix in Korea.

​

The Chinese market accounts for a significant portion of global semiconductor small businesses, including the United States. In particular, the Chinese position of the world's No. 1 companies in all process equipment such as AMAT and RAM Research exceeds 30%.

​

If the U.S. sanctions expand from the fleet process to the entire process, sales of global semiconductor small businesses in the U.S. will be significantly destroyed, which is not a favorable situation for the U.S. either.

​

However, the United States is currently preventing the increase in high-tech semiconductor fabs in China. The government blocked Intel from expanding its semiconductor fab in China last year in the same context as this concern. This stance can be an example not only for Korea but also for foreign companies.

​

The U.S. method is to prevent the expansion of additional high-tech semiconductor fabs and to delay China's semiconductor rise as much as possible by blocking the fleet process, and to maximize profits from its business. Given this situation, I don't think it will be easy to sanction China for the entire process.

​

(Of course, I think that if China invaded Taiwan, it could be a completely different story. The United States has already shown China its case in response to the Russia-Ukraine war. Does it look like this if I mess up?~~ This kind of feeling...)

​

​

3. It takes time to reshoring the US semiconductor production network.

​


Is today's Ukraine tomorrow's Taiwan? [Choi Wonseok's decode]
Today's Ukraine is tomorrow's Taiwan. CHOI WON SEOK's decode.

www.chosun.com

(I recommend it because it is a good article that gives me a lot of things to think about in connection with the US and Asia, especially Taiwan-Korea semiconductor business.)

​

The article is long, so to summarize only the semiconductor part,

​

1) Taiwan is at the heart of the U.S.-China semiconductor war.

- In semiconductor design, software, materials and equipment, the U.S. has the best range and depth of original technology. However, semiconductor production, especially advanced processes, depends on TSMC in Taiwan.

- Taiwan is geographically close to China, and China is aiming for absorption and unification with one China.

- China also depends on TSMC.

- So instead of preventing TSMC from doing business with Huawei, the U.S. gained more than losing TSMC by securing the volume of U.S. companies.

​

2) American sketch

- While protecting Taiwan, where TSMC is located, from China, pressure TSMC and Samsung Electronics to push for semiconductor fab reshoring to the U.S.

- While TSMC and Samsung Electronics are under pressure from the U.S., Intel's capacity to produce semiconductors in Europe has been increased (Europe is an ally of the U.S.)

​

3) Taiwan's position

- Will the United States support and protect Taiwan as it is now if TSMC moves all related supply chains to the United States under pressure from the United States?

- TSMC's Arizona plant will be operated in a 5nm process after 2024, but 5nm will not be a high-tech core facility due to the development of technology.

- TSMC wants to build a factory in the U.S. mainland under pressure from the U.S., but it wants to keep cutting-edge fabs in Taiwan.

- In this way, the U.S. and Taiwan must continue to push and pull. The fab of the state-of-the-art Shenzhen process, which produces semiconductors, is Taiwan's largest security weapon.

​

The above article may contain the personal reasoning of reporters, not facts, but the United States will not simply play the role of the world's police to protect liberal democracy as I learned when I was a child. It's questionable to even play such a role. Personally, I think the United States is a country that is thoroughly committed to its own interests.

​

In the end, the fact that the U.S. is also located near China, where the concentration of semiconductor production networks in Asia is likely to be a serious challenger to its hegemony in the future seems quite uncomfortable. As mentioned in the article above, the relocation of semiconductor supply chains can have various side effects by increasing unnecessary costs by increasing global semiconductor supply while astronomical capital is injected.

The U.S. position to build its own semiconductor production base through Intel's aggressive investment in its own countries and allies (Europe), global memory, and pressure on non-memory companies is so clear and firm.

​

From the U.S. point of view, it will not be easy for the U.S. to stimulate such important semiconductor production networks by imposing a certain level of semiconductor sanctions on China until they settle more than a certain percentage in the U.S. mainland.