Minister confirms South Korea’s participation in US-led chip alliance

South Korea is highly expected to join a strategic chip alliance proposed by the United States, as the trade minister stressed the country “cannot miss out” in the semiconductor industry, a key pillar of the Korean economy.

Minister of Trade, Industry and Energy Lee Chang-yang said the government is considering joining the so-called Chip 4 grouping that connects the four global chip powerhouses -- South Korea, the United States, Taiwan and Japan.

“We really cannot miss (opportunity) in the semiconductor industry, in that sense, we think about (joining) the Chip 4,” Lee said at the forum held jointly by the Hyundai Research Institute and the Korea Economic Daily in Seoul on Friday.

“There is no need to opt out (from the envisioned grouping). When we decide to join, we will make sure our interests are fulfilled.”

The US first made the proposal in March to South Korea, Japan and Taiwan to establish a strategic dialogue group to boost the manufacturing prowess of chips and strengthen partnerships of friendly nations. While the initiative explicitly aims at building partnerships, it is largely seen as a move to counter China's growing influence in the global chip market.

"South Korea holds its strengths in memory chip (production), Taiwan is strong in the foundry business. The US has the equipment and technology and Japan is strong in the materials and components," Lee said.

"When the four countries with their roles well allocated sit together, there is an advantage to significantly strengthen the chip supply chain.

Before, South Korea had taken part in the preliminary meeting of the so-called Chip 4 held in Taiwan in September, where they discussed chip supply resilience. But the government had appeared cautious about confirming its participation in the grouping at the time.

South Korea has strong economic ties with China, with China and Hong Kong importing almost 60 percent of the total chips made by Korean companies. For that, industry observers have been raising concerns over Korea's joining of the Chip 4, with China's strong opposition.

Amid escalating competition with the US, China had said it would be equivalent to "committing commercial suicide" for South Korea to join the US-led semiconductor grouping.

Still, market watchers view it is only wise for South Korea to participate in the Chip 4, and for the country to diversify its market and reduce reliance on China.

Rep. Ahn Cheol-soo of the ruling People Power Party called it a "good decision" for South Korea to partake in the Chip 4.

"Participating in the Chip 4 grouping may hurt (the country's chip) sales from the decline in China exports. But not participating in the Chip 4 would be the same as shutting down business after being thrown out from a monopolized market," Ahn said in a Facebook post on Friday.

By Jo He-rim (herim@heraldcorp.com)