China’s semiconductor prowess is becoming increasingly evident in important technology sectors, So reveals a recent report by the Korea Institute of Science and Technology Evaluation and Planning (KISTEP).

The South Korean think tank’s research indicates China has surpassed South Korea in foundational capabilities across nearly all semiconductor technology areas, including the memory sector, where South Korean firms have traditionally been global leaders.

KISTEP findings reveal a shifting semiconductor landscape

The KISTEP report is based on a survey of 39 South Korean semiconductor experts conducted in 2024, and highlights a significant shift in the global semiconductor landscape. According to the findings, China now outranks South Korea in memory chip technologies, where South Korean giants Samsung Electronics and SK Hynix have maintained dominance for a generation.

China now ranks second globally, trailing only the US in the sector. The change marks a substantial difference from KISTEP’s previous findings published in 2022, when South Korea held the second position after the US in the memory and advanced packaging technology sectors. China ranked third and fourth in these areas at that time, respectively.

“Even in the memory market, where Korea had maintained its unrivalled status, Chinese semiconductor companies are increasing their market share,” states the latest KISTEP report, adding that China is ramping up production of legacy chips “with little technology gap” compared to industry leaders.

Measuring China semiconductor dominance: technology scores and capabilities

The detailed evaluation conducted last year reveals that China’s high-density resistive memory technology scored a ranking of 94.1% (with 100% representing the highest level), outperforming South Korea’s 90.9%. This statistic is particularly noteworthy as memory technology has been South Korea’s most substantial semiconductor sector to date.

The report further demonstrates China’s advance in multiple semiconductor domains. In high-performance and low-power AI semiconductor technology, China scored 88.3%, exceeding South Korea’s 84.1%. It registered 79.8% for power semiconductors, significantly surpassing South Korea’s 67.5%, and in next-generation, high-performance sensing technology, China achieved 83.9% compared to South Korea’s 81.3%.

The two countries achieved parity only in advanced packaging technology, with both scoring 74.2% in foundational capabilities. However, Taiwan leads in semiconductor advanced packaging technology commercialisation, while the US dominates all other technology sectors in both foundational capabilities and commercialisation perspectives.

The KISTEP report also evaluated the technological lifecycle of the semiconductor sector, noting that South Korea maintains an advantage in process and mass production, while China excels in foundational capabilities and design. The report identifies South Korea’s foundational capabilities and design technology as the weakest links in its semiconductor life cycle, ranking lowest among evaluated countries.

Chinese memory manufacturers have been making significant strides in narrowing technology gaps with global industry leaders. ChangXin Memory Technologies (CXMT), a dynamic random access memory (DRAM) chip producer, has developed consumer-grade chips using 16-nanometer processing technology.

While still behind the 12-nm and 14-nm nodes used by Samsung, SK Hynix, and US-based Micron Technology in DDR5 memory production, the progress represents the closing of the technological divide. Growing Chinese semiconductor dominance comes despite extensive US export restrictions limiting China’s access to advanced chips and chip-making technologies. In response to those challenges, Beijing has implemented what observers call a “whole nation” approach to achieving semiconductor self-sufficiency, including establishing the country’s largest-ever chip investment fund last year.

Challenges and opportunities in the global chip race

The report highlights concerns about the impact of geopolitical tensions on South Korea’s semiconductor industry, including “the risk of Korea’s exports falling or being forced out of the Chinese market due to US export controls.” Other challenges identified include the exodus of core talent, intensifying competition in AI semiconductor technology, South Korea’s domestically focused policies, and rapid shifts in supply chains.

The findings represent a serious situation for South Korea, which has built much of its economic success on its leadership in the semiconductor market. To maintain its high-ranking position, the country must address its foundational capabilities and design technology shortcomings.

Taiwan remains a leader in advanced packaging technology commercialisation, while the United States continues to lead in overall semiconductor technology, both in foundational capabilities and commercialisation. However, China’s rapid advancement despite well-publicised international restrictions demonstrates the effectiveness of its focus and its national strategy to achieve technological self-sufficiency.

As China’s domestic semiconductor industry develops, particularly in memory technologies (which have traditionally lagged behind), the global semiconductor landscape is experiencing a significant realignment. The China semiconductor dominance emerging in foundational capabilities suggests that despite export controls and various restrictions imposed on the market, the country is making substantial progress toward its goal of technological self-reliance.

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Private 5G networks can bring significant advantages to their owners, including a safer area-wide network, plus the capability – depending on the territory – to sell the network’s coverage to one or more of a nation’s mobile network providers.

That’s on top of the ability to connect industrial internet-of-things (IIoT) devices in ways that are highly robust with real-time data at the operator’s fingertips.

The speed of 5G is often the headline act for the technology’s deployment, but its low-latency in certain applications (think, autonomous transport) have also found it advocates in more general use-cases. However, there’s a raft of underpinning technologies including specialist hardware that needs to be implemented in any installation, making its use a complex technological challenge for organisations outside the telecoms space.

Specialist comms and computing company HFR mobile [site in Korean] has completed its work to give a cutting-edge bio-processing production centre in Daejeon, Korea, the secure and fast, campus-wide communications network the owners, Merck, require.

Biotechnology campus under construction

The facility is still under construction, and is costing more than 300 million Euros (422 million SGD) to complete. It’s slated to be a centre for clinical research, process development, and commercial manufacture of biologics – products like vaccines, gene therapies, and monoclonal antibodies (one of the fastest growing areas of new drug production).

As you might imagine at such a facility, systems that ensure security and safety during construction are of paramount importance. The private 5G network designed and built by HFR mobile will run CCTV video surveillance connectivity to provide physical site security, as well as connecting smart safety equipment and monitors to a central management platform.

Workers’ safety, for example, will be monitored in real-time with feeds from their biometric data, and the safety management system can trigger alerts or automated safety equipment in response to abnormal indicators from staff or machinery at the site.

Fast and reliable communication systems are therefore the backbone of preventative and ameliorative measures. Hae-Kwan Jung of HFR mobile said, “A private 5G solution enables real-time response to prevent safety incidents. [We] deliver innovative solutions that bring smart construction sites to life.”

Centralised insights powered by communications

At present the 5G network comprises a control plane via HFR’s central operations hub, and equipment on-site that includes hardware for the user plane function, distribution and radio units. The performance of smart 5G systems outstrips the performance of many traditional networking technologies, and the management system from HFR allows its customers access to data that can be used in several way, depending on use-case:

• Digital twins: virtual representation of proposed topologies or changes to the network to pre-empt problems before they reach production.
• Safety and security managemnt: helping ensure physical site security and the wellbeing of on-site workers, as in the biocentre construction project, above.
• OT and IT: connected operational technology devices (OT and IIoT) and the integration of OT fleet data with ‘traditional’ IT tools.
• Business intelligence: including usage patterns, campus-wide attendance metrics, network optimisation, and more.

Outside of south-east asia, consumer-level 5G networks are relatively under-developed and tend to be confined to populous, urban areas. But it’s practical, outcome-focused communication installations in the form of private 5G that are helping companies worldwide adopt the technology more readily. In this respect, the APAC region is leading the rest of the world by example.

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In semiconductor manufacturing, there is a battle raging between Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung Electronics. As the demand for advanced chips skyrockets in the era of AI, 5G, and the Internet of Things (IoT), the competition between these industry giants has intensified, with each vying for dominance in the lucrative chip market.

Not too long ago, in a compelling twist unveiled during Samsung Electronics’ fourth-quarter financial disclosure of 2023, whispers of a meaningful deal echoed through the tech sphere: the company’s foundry division had clinched a coveted contract for 2-nanometer (nm) AI chips. At that point, shrouded in mystery, Samsung kept the identity of this pivotal partner concealed. 

Earlier this week, a revelation from Business Korea unveiled the patron: Japanese AI startup Preferred Networks Inc. (PFN). Since its inception in 2014, PFN has emerged as a powerhouse in AI deep learning, drawing substantial investments from industry giants like Toyota, NTT, and FANUC, a leading Japanese robotics firm.

Samsung vs TSMC

Samsung, headquartered in Suwon, South Korea, is set to unleash its cutting-edge 2nm chip processing technology to craft AI accelerators and other advanced AI chips for PFN, as confirmed by industry insiders on February 16, 2024. 

Should news of this landmark deal be legitimate, it would prove mutually advantageous. It empowers PFN with access to state-of-the-art chip innovations for a competitive edge while propelling Samsung forward in its fierce foundry market rivalry with TSMC, as per insider reports.

Ironically, PFN has had a longstanding partnership with TSMC dating back to 2016 but is opting to shift gears hereon, going for Samsung’s 2nm node for its upcoming AI chip lineup, according to a knowledgeable insider. PFN also chose Samsung over TSMC due to Samsung’s full-service chip manufacturing capabilities, covering everything from chip design to production and advanced packaging, sources revealed.

Experts also speculate that although TSMC boasts a more extensive clientele for 2nm chips, PFN’s strategic move to Samsung hints at a potential shift in the Korean giant’s favor. This pivotal decision may pave the way for other significant clients to align with Samsung, altering the competitive landscape in the chipmaking realm.

No doubt, in the cutthroat world of contract chipmaking, TSMC reigns supreme, clinching major deals with industry giants like Apple Inc. and Qualcomm Inc. But, as the demand for top-tier chips escalates, the race for technological superiority is heating up, with TSMC and Samsung at the forefront of the battle. While TSMC currently leads the pack, boasting 2nm chips for clients like Apple and Nvidia, Samsung is hot on its heels. 

“Apple is set to become TSMC’s inaugural customer for the 2nm process, positioning TSMC at the forefront of competition in the advanced process technology,” TrendForce stated in its report. Meanwhile, according to Samsung’s previous roadmap, its 2nm SF2 process is set to debut in 2025. 

“As stated in Samsung’s Foundry Forum (SFF) plan, Samsung will begin mass production of the 2nm process (SF2) in 2025 for mobile applications, expand to high-performance computing (HPC) applications in 2026, and further extend to the automotive sector and the expected 1.4nm process by 2027,” TrendForce noted.

Compared to the second-generation 3GAP process at 3nm, it offers a 25% improvement in power efficiency at the same frequency and complexity and a 12% performance boost at the same power consumption and complexity while reducing chip area by 5%. In short, with TSMC eyeing mass production of 2nm chips by 2025, the competition between these tech titans is set to reach new heights.

Yet, in a strategic maneuver reported by the Financial Times, Samsung is gearing up to entice customers with discounted rates for its 2nm process, a move poised to shake up the semiconductor landscape. With its sights set on Qualcomm’s flagship chip production, Samsung aims to lure clients away from TSMC by offering competitive pricing. 

This bold initiative signals Samsung’s determination to carve out a larger market share and challenge TSMC’s dominance in the semiconductor industry.

https://www.youtube.com/watch?v=Whr-r9tBb0c

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Nestled in the technological crucible of East Asia, South Korea’s semiconductor industry stands as a pulsating nerve center of innovation and industrial prowess. With giants like Samsung Electronics Co. and SK Hynix Inc. leading the charge, South Korea has scripted a tale of innovation, investment, and a relentless pursuit of global dominance. In a recent revelation, South Korea unveiled plans to invest over US$470 billion, marking a historic move to establish the world’s largest chip-making cluster. 

This ambitious endeavor encompasses a two-decade strategy, and the stakes are high. On Monday, the government delineated a roadmap for an investment totaling 622 trillion won (US$471 billion) in collaboration with private sector powerhouses, spanning the years until 2047. The plan envisions a landscape brimming with 13 state-of-the-art chip plants and three cutting-edge research facilities, supplementing 21 fabs. 

“As revealed by the Ministry of Trade, Industry, and Energy in South Korea, Samsung Electronics, SK Hynix, and other semiconductor companies are set to pool their resources into building 16 new fabs, with the potential to generate over 3 million job opportunities,” a report by TrendForce reads.

Stretching across the dynamic regions of Pyeongtaek to Yongin, South Korea’s chipmaking cluster is poised to be the largest on the planet. By 2030, the new mega chip cluster, spanning a massive 2,102 square meters, aims to churn out a staggering 7.7 million wafers monthly, setting new benchmarks in semiconductor production. The linchpins of this grand venture are Samsung and SK Hynix, each charting its unique course in the chip-making saga. 

Samsung, a global tech behemoth, is embarking on a bold foray into foundry services. With a colossal investment of 500 trillion won, Samsung seeks to redefine the landscape by manufacturing chips for other firms, cementing its status as a formidable player in the semiconductor ecosystem. 

“Within this sprawling cluster, Samsung Electronics has outlined plans to construct six new fabs at the national industrial complex in Yongin, with an investment commitment of 360 trillion Korean won. Additionally, the company intends to establish three fabs in Pyeongtaek, involving an investment of 120 trillion Korean won, and three research fabs at an R&D center located in the Giheung District, for 20 trillion Korean won,” TrendForce added.

On the other end of the spectrum, SK Hynix focuses on memory. Investing 122 trillion won in Yongin, SK Hynix aims to construct four sophisticated chip plants, laying the foundation for South Korea’s prominence in-memory technology in Yongin. According to the government, the primary objective of this supercluster is to foster an environment conducive to the production of cutting-edge memory chips, including high bandwidth memory (HBM) and system semiconductors measuring 2 nanometers or more advanced nodes,” 

Overall, the foresighted investment represents a substantial increase from the unveiling of Samsung’s and Hynix’s plans in 2023. South Korea’s government, working hand-in-hand with private enterprises for national interests, has been amplifying its support for a domestic chip sector that constitutes approximately 16% of total exports. 

In the face of escalating global competition, especially from Japan and Taiwan, which are aggressively bolstering their chip sectors, the Korean government is committed to providing significant tax incentives for local chip firms. The region is poised to host major players and smaller chip design and materials companies. 

The strategic move isn’t just about economic prowess; it’s a calculated step in securing South Korea’s future as a paramount force in global chipmaking. The overarching aspiration is to enhance the nation’s self-sufficiency in semiconductors while targeting a market share of 10% in global logic chip production by 2030, a significant leap from the current 3%.

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Samsung Electronics, the world’s largest memory chip and smartphone maker, has witnessed its most significant profit-driving segment — semiconductors — under pressure for most of this year. So much so that the South Korean giant reported losses of 4.58 trillion won and 4.36 trillion in its semiconductor business for the first and second quarters of this year, respectively. 

For its recently-concluded third quarter, Samsung’s usually lucrative semiconductor division is anticipated to report an over 3 trillion won loss, lower than previous quarters. The better-than-expected numbers, however, still signal persistent challenges within the chip market. For starters, memory chip prices have experienced a substantial decline throughout the year, primarily due to oversupply and reduced demand for devices like smartphones and laptops. 

The downturn has significantly impacted Samsung’s profitability. In its previous earnings report from July, the company had forecasted an uptick in chip demand during the year’s second half. Still, this resurgence seems to be unfolding more slowly than was initially anticipated. To address this issue, the tech giant has reduced its chip production, although the impact of this measure is unlikely to be reflected in the third-quarter results.

Samsung issued preliminary Q3 results. Here’s what they show

Samsung issued earnings guidance this week. As anticipated by the company, there was a more modest slide in quarterly profit after staunching losses at its semiconductor division all year. A Bloomberg report indicated that the 78% decline in operating income was better than what most analysts had feared.

Experts believe that memory chip prices have likely bottomed in the third quarter, with some types starting to rebound. According to Samsung’s preliminary results, the world’s largest memory chipmaker estimated its operating profit fell to 2.4 trillion won (US$1.79 billion) in July-September, on a 13% slide in sales. The numbers reflect an improvement from the record 95% year-on-year plunge in the previous quarter.

Analysts polled by LSEG expect an operating profit of 2.3 trillion Korean won (US$1.7 billion) for the September quarter, a 78.7% year-on-year (YoY) decline. Revenue is expected to come in at 67.8 trillion won, a fall of 11.6%, according to LSEG consensus forecasts. Samsung will give a more comprehensive snapshot of its earnings later this month. 

A report by CNBC has indicated that there could be two possible bright spots for Samsung that could lead to better growth in the September quarter. First, its display division could experience an increase in sales compared to the previous quarter, thanks to the launch of Apple’s iPhone 15 series, for which Samsung supplies displays. And second, Samsung’s smartphone segment could witness enhanced profit margins, driven by the high-end foldable phones introduced in July.

In a less-than-ideal outcome, Daiwa Capital Markets said in a note earlier this month that it expects Samsung’s earnings to miss consensus estimates “due to the higher cost burden from the memory production cut and ongoing soft demand” for its semiconductor manufacturing unit, known as the foundry business. Daiwa analyst SK Kim sees operating profit for the third quarter at 1.65 trillion won, much lower than the average analyst estimate of 2.3 trillion won.

But Kim forecasts the inventory glut easing and memory prices rising in the fourth quarter. Separately, a Citi note in August suggested that Samsung will begin supplying advanced memory chips for US semiconductor giant Nvidia’s graphics processing units, which are used for AI. Kim believes that will be a boost for Samsung, adding: “We expect growing opportunities related to AI demand in 2024.”

Terrible two: Samsung semiconductor and smartphone market slump

The global smartphone market has been in a slump for the past two years, and the first half of 2023 saw the most significant shipments drop in years. Most smartphone players, including Samsung and Apple, continued recording dips in their loads. But it has been worse for Samsung, which saw a more significant drop. 

Data from CasinosEnLigne.com shows Samsung shipped 114 million smartphones in the year’s first half, a 16% drop from the 136 million reported in the first half of last year. Overall, global shipments of smartphones are expected to decline by 3.2% in 2023, according to a forecast from International Data Corporation’s Worldwide Quarterly Mobile Phone Tracker. 

Recovery is only anticipated from 2024 onward.

A better-than expected result, but still a significant profit plunge for Samsung.

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Zuckerberg believed the metaverse was the answer to work-from-home fatigue during the pandemic. He felt that the metaverse would serve as a platform for users to escape reality,  yet remain productive. When it was launched, one of the earliest demos was of his avatar speaking to co-workers in the metaverse.

Soon, everyone wanted to be a part of the metaverse. Other tech companies started pouring in millions to develop their own metaverse platforms. Some companies even took to enhancing their digital worlds to cater directly to entertainment purposes. Fashion brands like Nike and Adidas started selling digital apparel in the metaverse, which users would buy – with real currency – for their avatars.

Real estate in the metaverse reached new heights as well. Brands were competing to have the best design and spot in the metaverse to attract more users. Decentraland, a 3D virtual world browser-based platform like the metaverse held the first ever virtual concert. However, all the hype was slowly fading.

To fully experience the metaverse, a user would need to invest in VR headsets. While there are many varieties available, the prices were not really affordable to the masses. Platforms like Decentraland and The Sandbox, another immersive experience platform, soon reported huge drops in users. According to reports, data from DappRadar in October 2022 suggests metaverse platforms Decentraland and The Sandbox each have fewer than 1,000 “daily active” users, despite US$1 billion valuations.

Today, the metaverse is nowhere near achieving these goals. In fact, apart from being used as an entertainment platform, there isn’t really much one can do in the metaverse. McKinsey predicts that the metaverse has the potential to generate up to US$ 5 trillion in value by 2030 and is too big for companies to ignore.

Unfortunately, companies are now moving away from the metaverse and are in favor of generative AI tools. As the metaverse would end up being like an entertainment platform for employees, more companies are switching their focus to generative AI investments that not only come with promises of improved productivity but are also a lot less expansive than investing in the metaverse.

Metaverse: From entertainment to education

While the metaverse use cases continue to flow toward the entertainment platform, there are some plans to use it for education. Several Asian nations are already planning use cases for the metaverse to boost education services.

According to Nick Clegg, President of Global Affairs for Meta, metaverse technologies have the potential to transform school lessons, bring teachers and students together remotely in shared spaces, enhance vocational training and create new opportunities for lifelong learning.

“For most of us, learning is social — we learn from and with others, and from each other’s experiences. It’s about interaction and discussion as much as it is about absorbing facts. Academic studies have found that VR can positively improve comprehension, knowledge retention, student engagement, attention span and motivation. I think that’s something we all intuitively understand. It is so much easier to remember doing something than being told something,” said Clegg in a blog post.

South Korea, which was among the first to invest in the metaverse, initially had plans to develop government use cases for the platform. The country invested US$177.1 million in a move it hoped could provide a blueprint for others to follow.

South Korea is funding 40,000 professionals and 220 companies specializing in metaverse technology. They’re already off to a great start with the launch of Metaverse Seoul, the first virtual public administration platform in the world. However, according to a recent survey by the Korean Information Society Development Institute, only 4.2% of South Koreans have regularly used metaverse services.

But that isn’t slowing the country’s mission. The Pohang University of Science and Technology in South Korea is being transformed into a “metaversity”. The university plans to digitize classrooms in the metaverse and offer courses in cyberspace. The university has also invested US$300,000 in equipment and program development for students and allocated another US$500,000 to create metaverse classrooms.

Meanwhile in Japan’s N and S high schools, the largest online high schools in the country, more than 6,000 students learn in virtual reality (VR) using Meta Quest 2 headsets. Their teachers report that this enhances the learning experience and enables students to nurture social skills even when they are physically far away. A survey on VR participation showed a satisfaction rate of more than 98%.

While it remains to be seen how this can be applied to other use cases in the future, for now, the metaverse has found itself a key education platform and not just another entertainment site.

As Clegg puts it, “Metaverse technologies have the potential to transform education. It’s happening right now, but realizing the potential in the years ahead will require educators and policymakers to grasp the opportunities these technologies present.”

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Since April this year, the world’s largest memory chip maker, Samsung Electronics Co., has anticipated its lowest profit for any quarter since 2009. So much so that the South Korean giant decided to cut back memory chip production as its operating profit in the second quarter of 2023 is expected to plummet about 96% from the previous year. 

Before the second quarter of this year, Samsung wasn’t planning to slash its memory chip investment despite dwindling demand, hoping for a recovery of the memory chip market in the second quarter of this year. Unfortunately, prices for memory chips, its most significant business, continue to fall while demand weakens.

By the end of its January-March quarter, the company reported a whopping 4.58 trillion won (US$3.5 billion) loss in its chip business as memory chip prices fell further and its inventory values were slashed. Then came the most recent guide released last week, where the South Korean technology giant predicted that it would post more dwindling operating profit.

In a preliminary result announcement for the April-June period, Samsung said the company may have just recorded its worst overall operating profit in 14 years.

Precisely, Samsung reckons its April-June quarter would see an operating profit of 600 billion Korean won (US$458 million), down from 14.1 trillion won (US$10.8 billion) a year earlier. According to company data, that would mean Samsung’s lowest profit for any quarter since a 590 billion won (US$451 million) profit in the first quarter of 2009. 

On the other hand, second-quarter sales will likely fall 22% to 60 trillion won from 77.2 trillion won, Samsung said in a short statement.

The end of memory chip downturn is in sight

The semiconductor industry has been grappling with its worst downturn in years after enjoying a pandemic-induced boom in tech purchases that boosted sales. Since last year, the global economic slowdown, inflation, and geopolitical tensions have prompted significant pullbacks in corporate and consumer spending on electronics that drive demand for memory chips.

“Prices for the two main types of memory chips, DRAM and NAND flash, peaked during the Covid-19 pandemic, driven by strong demand for tech products. Prices began falling sharply in the second half of last year, and the slump has continued into 2023 amid a supply glut. DRAM memory enables devices to multitask, while NAND flash memory provides storage functions on devices,” a Wall Street Journal report stated.

Prices of DRAM chips – widely used in smartphones, PCs, and servers – fell 13-18% in the second quarter from the previous quarter as buyers refrained from new chip purchases, according to market tracker TrendForce. In the third quarter, average contract prices of DRAM are projected to fall quarterly by 7% and NAND flash by 1%, and in the fourth quarter by 3% and 7%, respectively.

That compares with double-digit quarter-to-quarter price falls for both types of memory projected for the first and second quarters, according to TrendForce. Even Gartner’s latest forecast suggests that “recovery is on its way – the slump will bottom out this year.” 

Gartner’s report also noted that memory is likely to be the hardest hit part of the sector, with revenue projected to decline 35.5% this year to US$92.3 billion, mainly due to overcapacity and excess inventory pushing down the price of memory chips. The upside is that Gartner expects to see memory bounce back with a vengeance next year with a forecast 70% growth in revenue.

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For most of last year, there had been talks of how South Korea–after years of walking a thin line between the US and China–is under tremendous pressure to pick a side in the growing technological rivalry between its military ally and its largest trade partner. Then when the US-led Chip 4 Alliance began taking shape earlier this year through preliminary meetings, the South Korean government’s verdict was clear.

Fast forward to last week, during the 2023 APEC Trade Ministers meeting, Chinese Commerce Minister Wang Wentao met South Korea’s Trade Minister Ahn Duk-Geun. Here’s what was interesting; China said it agreed with South Korea to strengthen dialogue and cooperation on semiconductor supply chains. However, South Korea did not mention discussions between the trade chiefs about the chip sector.

Seoul only noted that Ahn requested support from Beijing to stabilize the supply and demand of critical raw materials and parts. According to Wang, the talks, on the sidelines of the APEC trade ministers’ meeting in Detroit, also included views on maintaining the stability of the industrial supply chain and strengthening cooperation in bilateral, regional, and multilateral fields.

According to a separate statement, Ahn specifically asked Wang also to support forming a “predictable” business environment for South Korean companies operating in China. 

Where is South Korea in the US-China tech war?

In February this year, the meeting between the US, South Korean, Japan, and Taiwan senior officials took place virtually, following months of coordination. For context, the Chip 4 initiative is designed to stabilize semiconductor supply chains. Besides the US, the envisioned partnership includes Japan, a leader in semiconductor-manufacturing materials; Taiwan, the top producer of cutting-edge chips; and South Korea, whose output capacity is second only to Taiwan’s.

But of course, the initiative is also seen as an attempt to freeze out China, which is racing to advance its chipmaking technology. The push has undoubtedly put South Korea, which has long focused on maintaining a balance between its economic ties with China and its security cooperation with the US, in a difficult position.

While South Korean President Yoon Suk-you considers the bilateral alliance with the US a priority and has expressed an interest in Chip 4, Beijing was also ramping up pressure on Seoul. In August, Chinese Foreign Minister Wang Yi even told South Korean counterpart Park Jin that the two countries should maintain their independence and freedom from external interference.

To put into context how prominent the Chinese market is for South Korea, China accounted for 24% of South Korea’s total trade in 2021, making it the latter’s largest trade partner. Around US$76.8 billion, or 60%, of South Korean semiconductor exports went to China that year, as did many chemicals, machinery, and other vital products. In short, China’s higher tariffs and other sanctions could blow a heavy blow to South Korea’s core industries.

For semiconductor players, it is equally detrimental. Around 20% of Samsung Electronics’ memory chips are produced in the Chinese city of Xi’an, while SK Hynix operates a plant in Wuxi and acquired Intel’s Dalian plant in 2021. It now makes 40% of its chips in China. 

Before last week’s talks between Wang and Ahn, Seoul challenged Washington on its proposal to limit the expansion of production by South Korean semiconductor manufacturers in China, saying it created “an unreasonable burden” on investment. The US Commerce Department in March unveiled its proposed “national security guardrails” for the Chips Act.

The guardrails bar companies receiving federal subsidies in the US from expanding output beyond specific little caps in “foreign countries of concern” – specifically, mainland China, Russia, Iran, and North Korea.

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In late February, it was revealed that Samsung’s collaboration with Naver Financial would promote its mobile payment system, making digital payments more convenient for users. Currently, Naver Pay is Korea’s second-largest mobile payment provider, meaning the deal ensures a much stronger presence for Samsung in the face of incoming competition.

Apple Pay was launched in the US in 2014, allowing Apple device users to make payments in person and online without physical cards. It soon became the second-most popular digital payment system worldwide, totalling $6 trillion worth of transactions in 2021, behind Visa with $10 trillion. Meanwhile, Samsung Pay only reached $200 billion in the same year.

Despite its global shortcomings, Samsung Pay was the most-used financial services app in Korea, with 16 million users as of November, 2022. The service is based on magnetic secure transmission (MST) technology. Apple Pay uses a different method, short-range wireless protocol near-field communication (NFC), which there hasn’t been the infrastructure to suport in Korea. This is all set to change, as the company recently got approval from the Financial Services Commission to bring Apple Pay to Korea.

In preparation for Apple Pay’s launch, Samsung’s statement on Monday said the partnership with Naver Financial seeks business synergy between the two popular payment services. The deal is considered beneficial for both companies: Naver Pay, the top player in online payments in Korea can use Samsung’s offline 5G networks, while Samsung Pay’s offline payments will work at around 550,000 online stores on Naver.

Counterpoint Research data showed that 83% of the Korean market was taken up by Samsung smartphones, while Apple only counted for 13%. Following the iPhone 14 launch, Apple did replace Samsung as the top global player in the fourth quarter of 2022, but the margin was small: 23% for Apple, with Samsung close behind on 19%.

Samsung Pay will benefit from Naver Pay’s existing 35 million members, but the future still seems uncertain. University student community operator Vinu Labs Inc. found in a survey that of 2,000 students, 89% felt the Apple brand was “trendy,” with other responses calling it “refined” and “luxurious”. Gen Z Galaxy users have said they’ll swap smartphones to iPhone with the incentive of Apple Pay.

Samsung partnership to fend off Apple

Local industry will be keen to see how Samsung fares after the launch of Apple Pay. The market share of Samsung is expected to drop, despite its attempts to prevent Apple Pay’s expansion. According to an industry official, to begin with, Apple Pay will be “limited in terms of convenience” as it won’t support services such as transportation payments.

Ultimately, forecasts by Counterpoint suggest that Apple Pay is unlikely to significantly change the Korean smartphone market. Its launch will rouse interest, but it’s unlikely that many people will change devices because of the service. Perhaps Galaxy users stand to benefit from Apple’s expansion into Korea, as Samsung ups its game to stay ahead.

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The Chip 4 Alliance, a semiconductor working group initiated by the United States (US) in late 2021, is finally gearing up for more collaboration and concerted efforts, as senior officials from each country met for the first time last week. The meeting between the US, South Korea, Japan, and Taiwan senior officials took place virtually on February 16, following months of coordination.

To recall, the preliminary meeting of the Chip 4 Alliance took place last September, but it only involved working-level officials from the four governments. This time, Taiwan’s foreign ministry said the “US-East Asia Semiconductor Supply Chain Resilience Working Group“, or “Fab 4”, had, after many months of coordination, held the first video meeting of senior officials from its working group on February 16.

“The focus of the discussions of the participating quartet at the meeting was mainly on how to maintain the resilience of the semiconductor supply chain and explore the possible future cooperation directions of all parties,” the Taiwanese ministry said in a statement. The ministry, however, did not elaborate on which officials took part in the call.

“As an important member of the Indo-Pacific region, our country also plays a key role in the global semiconductor industry and has deep economic and trade relations with countries in the region,” the ministry added. The countries that are members of the group in the Indo-Pacific region are home to some of the world’s largest contract chip makers.

That includes Taiwan Semiconductor Manufacturing Co Ltd, South Korean memory chip giants Samsung Electronics Co Ltd, and SK Hynix, with Japan being the supplier of materials and equipment required to make the semiconductors. With the US as a chip design powerhouse and the other three countries having top capabilities in manufacturing and production of critical equipment and materials, the envisioned alliance would cover all major areas of the chips value chain.

In an interview with the New York Times last year, South Korean President Yoon Suk-yeol said the Chip 4 alliance is “necessary” for the four countries to closely communicate on the semiconductor industry, despite fears that doing so could anger China. Under Yoon, South Korea joined the Indo-Pacific Economic Framework, often seen as an American-led effort to counter China in the race to secure global supply chains.

In response, China has criticized the alliance as an entity aimed at containing China’s growing influence in the industry and opposed South Korea’s joining the grouping. There have also been arguments that, to date, the Chip 4 Alliance has remained a proposed working group with no clear indication of when it will be fortified.

While two virtual meetings have been held to date, no concrete outcome has come from the meetings besides the intention to drive technological breakthroughs and withstand supply disruption emanating from trade conflicts or geopolitical tensions. But for China, it’s growing to be more complicated with the mounting export controls from the US.

To top it off, the Biden administration last month secured support from Tokyo and The Hague to tighten export controls on advanced chip manufacturing equipment and technologies to China. The move will make it increasingly difficult for Dutch and Japanese suppliers to sell to Chinese clients.

It is undeniable that recent developments in the US-China technology war have reshaped the future of the semiconductor industry, which has become a hot-button issue in geopolitics. Perhaps one of the most pressing expositions in the midst of the ‘chip war’ is a bunch of vulnerabilities in China’s semiconductor manufacturing capability and strength.

Although in the short run, US measures may topple China’s advancement, in the long run, the chokepoints set by the US measures may soon become less effective. Experts have also argued that a chunk of big and small Chinese companies will eventually find ways to manipulate loopholes in US regulations if efforts to enforce a blockade are ineffective.

When the US first announced its most aggressive measures against China last October, experts reckoned that the effort could backfire without buy-in from foreign partners and allies. Given the complexity of global supply chains, assistance from allied semiconductor states – especially fellow chip-making tool producers Japan and the Netherlands – is critical to restrict Chinese access to the materials, equipment, and advanced chips that enable production. 

So far, the US is heading in the right direction since it has successfully gathered support and partnership with major chip producers in Europe and Asia. It is left to see how the Chip 4 Alliance will play out against China and if there will be counter measures from the latter.

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