Samsung veteran sounds alarm over Korea Losing Global Chip War

(Bloomberg) — In three decades at Samsung Electronics Co., Yang Hyang-ja, 84, helped shape the conglomerate’s current dominance in global memory chip manufacturing. Now it faces a broader challenge: maintaining Korea’s relevance as the U.S. and China battle over semiconductors.

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Yang, who rose from a research assistant position at the storied company before leading its memory chip development division, is the lead architect of a nationwide effort to fund and strengthen the domestic chip industry. His mission is growing in importance as the United States, China and Japan spend billions building their own chip supply chains, clouding Korea’s future role in semiconductors, he told Bloomberg Television.

It’s a matter of national security, he said, echoing those in Washington and Beijing who have focused talent, money and policy support on developing the silicon cores that power future generations of technologies from artificial intelligence and the metaverse. calculation and especially military ability.

“We are in a chip war,” Yang said in an interview in December. “The advantage of technology is a way that our country can take the lead in any security-related agenda, such as diplomatic and defense issues, without being influenced by other countries.”

Yang, who heads a 13-member special committee set up this year to brainstorm a solution under President Yoon Suk Yeol’s ruling party, argued that only through strong and direct intervention could Seoul expand its position in the $550 billion global semiconductor industry. He is one of a growing number of global politicians who have embraced technological protectionism after pandemic-driven logistics crunches highlighted countries’ interdependence for key electronic components. It is SK Hynix Inc. and gained an ally in Yoonda, who joined Yang’s calls for more policies to help the country’s domestic chip sector, which includes Samsung.

His efforts may be starting to pay off. Last month, the parliament passed the Korean version of the US chip law. The move, led by Yang, speeds up the approval process for building factories in the capital area while increasing the number of tech-specialized schools. Separately, parliament passed a preliminary bill offering an 8% tax credit to large firms investing in semiconductor manufacturing, smaller than Yang’s proposed 20% to 25%.

These gestures are a far cry from the billions of dollars in subsidies that other countries have committed to chip manufacturing, Yang said, adding that short-term political interests are blinding fellow lawmakers in the National Assembly. Some of his peers, in turn, argued that overly generous incentives threatened government finances and would only benefit big companies.

On Tuesday, the finance ministry announced a plan to increase the tax relief on the capital of large companies to 25%. It is unusual for an administration to propose major changes immediately after lawmakers pass a bill.

Yang said that if the government does not increase its incentives, more Korean companies may move their main manufacturing facilities to the United States and take their best engineers with them. Samsung plans to build a $17 billion semiconductor plant in Texas and has suggested spending about $200 billion on a series of plants in Austin and Taylor.

Korea has a unique opportunity to counter this trend, Yang said. Taiwan — home to Taiwan Semiconductor Manufacturing Co. — makes most of the advanced chips that run the latest iPhones, servers and supercomputers. That has sparked calls around the world to diversify production away from an island China claims and threatens to occupy.

“Samsung is the only company in the world that can fill TSMC,” Yang said.

Yang, who first entered politics at the urging of former President Moon Jae-in in 2016, is an independent lawmaker and left the Democratic Party in 2021 amid criticism over its response to a sexual assault allegation against an aide. relative Yang later apologized. A police investigation did not lead to any charges against the deputy.

Chip policy is taking his time. Growing sanctions against advanced technology are putting increasing pressure on the country to choose between its security ally, the United States, and its largest trading partner, China. Both have asked South Korea to expand their chipmaking partnership.

But Seoul avoided public comments about the Biden administration’s commitment to sanctions on exports of US-related know-how to China.

This sensitive situation underscores the need for Korea to build its domestic technological capabilities — or risk becoming more dependent on foreign powers, Yang said.

Yang said it is time to offer more incentives to Korean companies to build manufacturing capacity at home rather than abroad. He said that the country should do more to retain young talents.

“How else could our country live?” he said. “It would become a new technological colony.”

–With help from Emily Yamamoto.

(Updates with details on Korea’s revised chip bill)

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