As the Biden government’s China policy takes shape, the virtual CEO Summit hosted by President Biden on April 13th is an event that has attracted widespread attention recently. In a kind of “strategic patience” with regard to China policy, President Biden has made it clear that his government wants to achieve something Two goals, Strengthening the American semiconductor industry and securing the national supply chain for these vital technologies, including semiconductors, from the CEO Summit, which brought together 19 multinational companies (excluding their Chinese counterparts) in a single event. As indicated and outwardly explained by President Biden himself, these two goals are aimed at maintaining the technological development of the USA guide in the semiconductor industry and kept China out of the supply chain that American industry relied on.
Bipartisan support in Washington to compete with China in technological competition is a daunting undertaking that affects its allies in East Asia as much as it does Beijing. This stemmed from the fact that these American allies are the sources of semiconductor supplies, and such importance was made clear by the participation of multinational corporations such as Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung in the recently held virtual CEO summit. Likewise, by reorganizing the global semiconductor supply chain without the presence of Chinese stakeholders, Beijing is also expected to enact its own responses to such technological isolation as envisioned by the Biden government. Overall, we should expect the following scenarios in the coming months to years.
What can we expect in the coming months?
First, a “clean” semiconductor coalition will inevitably be formed in East Asia with the US as the leader and main coordinator for such an alliance or partnership. While most of the world’s goods are made in China and are easily reproducible from their Chinese counterparts, the same is not true of the semiconductors. At the core of various technologies such as Artificial Intelligence (AI), supercomputers, etc., semiconductors are the most secret “gems” that their manufacturers protect all counterfeit attempts by other parties through intellectual property (IP) and other legal means around the world. With the monopoly of TSMC and Samsung 10nm-5nm Chips production while at the same time giving them the upper hand 32nm-12nm Today, both Taiwan and South Korea are only natural partners in Washington’s reorganization of the world’s semiconductor supply chain. This is the first foundation that the US willingly prepares for the reorganization of the semiconductor supply chain in the world.
Coincidentally, both South Korea and Taiwan are highly dependent on the US military for their national security. Whether as protection against North Korea’s military intervention or as a deterrent against China in the Taiwan Strait, the US security role is essentially critical to maintaining the status quo in the region. With such a built-in military alliance (South Korea) and partnership (Taiwan) in place, the Biden government will have another strong foundation to advance its semiconductor cooperation with Seoul and Taipei in the coming months. Needless to say, the US is using the same foundation to share the much-anticipated semiconductor deal with. complete Japan at the summit of the two national heads of state and government in April.
Second, South Korea is expected to abandon its position in the US-led “clean” semiconductor coalition as the country faces a dilemma between supporting its security ally in Washington or avoiding economic interests against Beijing. Unlike Japan, which is expected to demonstrate its support for the US-led semiconductor supply chain, South Korea has yet to take a clear stance on joining the coalition that clearly aims to exclude China from the global semiconductor supply . This is not difficult to understand as China remained South Korea biggest Trading partner and its involvement in the US-led semiconductor supply chain will inevitably lead to strong economic reactions from Beijing, one point from China nationalist campaign against the consumption of South Korean products and the visit to the country in its resistance to the installation of the US THAAD missile defense system in South Korea.
On the other hand, Seoul’s main and tangible security threat remained North Korea, not China. This is in contrast to Taiwan, which faced powerful China across the strait, whirling up its fighter jets as well as its coastal and naval vessels in response to Beijing’s territorial incursions into its Air Defense Zone (ADIZ) and contingent seas. Such a threat scenario definitely does not apply to the South Korean case when it comes to its relations with China. Given these considerations, there is no compelling reason for the Moon Jae-in administration to intimidate China by willfully playing Washington’s game plan and provoking another round of economic reprisals from Beijing if it does not have basic security concerns among its neighbors. The only groundbreaking plan, however, is the 2022 presidential election, which could see Conservatives regain power and take a tough stance on the country’s national security policies. But until then, the Moon Jae-in government faces another major dilemma in its complicated situation in East Asia.
Third, there is no question that China will have to push its own semiconductor development strategy and that Taiwan will be in the spotlight because of its semiconductor expertise in the global supply chain. With TSMC currently the world leader in semiconductor manufacturing, Taiwan remained China’s best choice to attract the island’s best talent and technological know-how to support the invention and production of its own chips. These two main aspects will definitely be the focus of Chinese counterparts such as the Semiconductor Manufacturing International Cooperation (SMIC) when it comes to producing 5 nm semiconductors entirely in-house, thereby helping China to overcome its semiconductor dependency on other countries . At this critical juncture, it remains to be seen whether the US can do much more with the Taiwanese authorities to effectively respond to these Chinese efforts rather than relying solely on Taipei to inform them about that Law Regulating the Population of Taiwan and Mainland China and Trade Secrets Act. Failure of a successful coordination will be a further step forward for Beijing to achieve local production for these semiconductors.
In general, the biggest challenge facing the US-led reorganization of the semiconductor supply chain is harmonizing and coordinating semiconductor policy between Washington and its East Asian allies. This requires a transnational agency to oversee and regulate the semiconductor policies and industries of all participating nations, with the two goals of limiting semiconductor supply to China and maintaining its technological edge over its Chinese rivals. China faces the most difficult challenge of the century as it is completely on its own in semiconductor production, which is used in various industries and the military. If this endeavors succeed, there will be two semiconductor supply chains worldwide, one from the US-led coalition and the other from China.