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US, Japan, South Korea Launch Forum to Cut Off Chips to China 

FILE - Commerce Secretary Gina Raimondo in Washington, Sept. 6, 2022. On Tuesday, the administration invited companies to compete for funds to build and expand domestic manufacturing semiconductor facilities. “This is fundamentally a national security initiative,” Raimondo said.
FILE - Commerce Secretary Gina Raimondo in Washington, Sept. 6, 2022. On Tuesday, the administration invited companies to compete for funds to build and expand domestic manufacturing semiconductor facilities. “This is fundamentally a national security initiative,” Raimondo said.

In a bid to outcompete China technologically, the Biden administration on Tuesday launched a new dialogue forum with Japan and South Korea on friend-shoring semiconductors as it invites companies to compete for a share of the $50 billion already approved to revitalize the U.S. chip industry.

The inaugural meeting of the Economic Security Dialogue among the United States, Japan and South Korea was launched Tuesday in Honolulu. Japan and South Korea are home to two of the world's strongest semiconductor industries, and the forum aims to address issues related to critical and emerging technologies, supply chain resilience of semiconductors, batteries and critical minerals, as well as data transparency amid the U.S.-China tech war.

Also Tuesday, the administration launched the first CHIPS for America funding opportunity — an invitation for companies to compete for a share of the $50 billion approved by Congress under the CHIPS Act last year, specifically the $39 billion allocated to fund the construction of new and expanded domestic manufacturing semiconductor facilities.

Much of the funds will be used by the few companies already producing the world's most advanced chips — including Taiwan Semiconductor Manufacturing Company (TSMC), Samsung Electronics and Micron Technology — to ramp up their production capacity in the United States.

As the Biden administration aims to constrain Beijing's semiconductor industry, there are hurdles to overcome, including whether Seoul will be willing to join Washington's ban on exports of advanced chip-making equipment to China that Japan and the Netherlands have recently agreed to join. Both are home to companies that are global leaders in chip manufacturing technologies.

There is also concern that Washington's moves to reshape the global semiconductor ecosystem might weaken Taiwan's semiconductor industry, which Taipei believes to be one of its strongest security guarantees to deter an invasion by Beijing.

Tri-country dialogue

The economic security dialogue is an expansion of the trilateral cooperation among Indo-Pacific partners that previously focused largely on the North Korean nuclear threat. The terms of the partnership were laid on the sidelines of the East Asia Summit in Phnom Penh in November 2022.

The dialogue is an important forum for Washington as it seeks to build a unified front with partners to restrict sales of advanced semiconductor manufacturing equipment to China. A key issue will be where Seoul stands on the U.S. export control ban enacted by the Biden administration in October 2022, said Gregory Allen, director of the artificial intelligence governance project at the Center for Strategic and International Studies.

"What if the United States and Japan stopped selling certain types of advanced semiconductor manufacturing equipment to China, and the South Korean industry moves in to fill that gap?" he told VOA. "That's the sort of scenario that both the United States and Japan want to avoid."

Seoul is also seeking clarity on how the rules stemming from the export control ban might impact South Korean companies that are running significant semiconductor manufacturing operations in China. South Korea has received a one-year exemption, as details of how the ban might be implemented are still being worked out.

Much work still needs to be done in getting Japanese and South Korean industries to buy into Biden's strategy of cutting off chips to China, said Samantha Howell, a research assistant with the technology and national security program at the Center for a New American Security.

"China is a really big market for Japanese and South Korean companies, so there's a little bit of hesitation to pull out of that market or even restrict involvement in that market, because it could potentially harm these companies financially," she told VOA. "There's also fear, particularly in South Korea, about potential retaliation from China should South Korea get on board with U.S. export controls."

Last week, senior officials from the U.S., South Korea, Japan and Taiwan held a virtual preliminary meeting for the Biden administration's proposed Chip 4 initiative designed to stabilize semiconductor supply chains, including by setting up an early warning system to prevent disruptions, potentially including chipmaking raw materials and manufacturing equipment.

Meanwhile, China is ramping up its own domestic chip capacity. It is reportedly planning on a massive $140 billion package to bolster self-sufficiency and counter U.S. moves.

Earlier this month, Chinese Foreign Ministry spokesperson Mao Ning said Washington has "overstretched the concept of national security, abused export control measures, disrupted normal economic and trade activities, and destabilized global industrial and supply chains" to maintain economic and technological supremacy.

Taiwan concerns

As part of the U.S.-led push to secure global chip supply chains, TSMC has agreed to invest $40 billion to build semiconductor plants in Arizona. The facilities are scheduled to be operational in 2024 and are among the largest foreign investments in U.S. history.

However, as producer of more than 90% of the world's most advanced semiconductors, some in Taiwan are concerned that moving its production to the U.S. and elsewhere may weaken one of the island's most important geopolitical assets known as the "silicon shield."

Theoretically, the silicon shield protects Taiwan from a Chinese military invasion in two ways. First, China depends on TSMC to produce the bulk of the chips it needs for its consumer electronics industry, linking Beijing's bottom line to Taiwan's stability, which may push China toward military restraint. Second, the dependence of major economies, including the U.S. and the European Union, motivates those countries to stand up for Taipei's sovereignty.

Allen said such an acute dependence on one country's chip factories is simply not sustainable. He stressed that with increased digitization globally, Taiwan will remain strategic in any scenario.

"Even if you go from 90% to 75%, Taiwan is still going to be a critical node in the global economy," he said, adding that by having TSMC set up production operations in the U.S., Taiwan will grow the overall number of computer chips that it produces even as its share of the global market is reduced.

America's technological leadership

In the coming months, additional funding opportunities for supply chain companies and research and development investments will be announced, U.S. Secretary of Commerce Gina Raimondo said last week in a speech on the administration's goals to "build a reliable and resilient semiconductor industry that protects America's technological leadership for the coming decades."

"In 1990, the U.S. accounted for 37% of global chip manufacturing capacity," Raimondo said. "Today, that number is only 12%."

The pandemic-induced semiconductor shortage has wreaked havoc on numerous industries, from automobiles to consumer electronics. The U.S. Department of Commerce estimated that the chip shortage caused a 1% decline in the country's 2021 GDP growth.

Paris Huang contributed to this report.