[News] South Korean Government Considering Cooperation with U.S. on Semiconductor Equipment Export Controls against China

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As the pressure from the United States to strengthen export controls on semiconductor manufacturing equipment to China continues to grow, as per a report from Yonhap News Agency (YNA), the United States has reportedly urged allies such as Japan, the Netherlands, Germany, and South Korea to join forces and expand the scope of their containment measures, extending to equipment, raw materials, optical components, and other areas.

While countries like the Netherlands, Japan, and Germany have yet to make their positions known, the same report indicates that the South Korean government, in efforts to maintain stability in its relationship with the United States, is considering cooperation with U.S. efforts to impose export controls on semiconductor equipment to China.

YNA’s report has indicated that, since October 2022, when the U.S. government announced a ban on American companies exporting equipment and technology essential for advanced semiconductor manufacturing to China, it has continuously urged its allies to implement similar levels of export controls on exports to China.

Sources cited by the report indicate that initially, the Netherlands and Japan, which have high levels of semiconductor technology, were the primary targets of U.S. pressure. However, starting from the second half of 2023, the pressure from the United States on South Korea has intensified, even directly naming specific South Korean companies.

In February this year, the U.S. Department of Commerce and the South Korean Ministry of Trade, Industry, and Energy reportedly held negotiations on this issue. Sources cited in YNA’s report revealed that the U.S. side is concerned that South Korea could become a loophole in its export controls on semiconductor technology to China, and South Korea is working to address U.S. concerns.

The same sources stated that although the South Korean government has not yet made a decision on this matter, considering national interests and taking into account the U.S. position, it is at least inclined to “partially” meet U.S. demands.

Per the same report, the South Korean government is also concerned that measures related to export controls on China will adversely affect the competitiveness of the South Korean semiconductor industry. South Korean companies’ semiconductor equipment technology is already inferior to that of the United States, Japan, and the Netherlands. If exports to China, particularly crucial ones, are further restricted, it will undoubtedly worsen the situation for the semiconductor industry in South Korea.

Yeo Han-koo, a senior researcher at the Peterson Institute for International Economics (PIIE) who formerly served as Director-General of Trade Negotiations at the South Korean Ministry of Trade, Industry, and Energy, noted that considering the recent dynamics in U.S.-China relations and international geopolitical factors, South Korea faces challenges in completely disengaging. However, South Korea aims to minimize losses for its companies to the greatest extent possible and is committed to exploring reasonable compromise solutions with the United States.

On the other hand, as per TrendForce’s previous report, China is focusing aggressively on mature process technologies (28nm and older), particularly in response to export controls on advanced equipment by the US, Japan, and the Netherlands. By 2027, China’s share in mature process capacity is expected to reach 39%, with room for further growth if equipment procurement proceeds smoothly.

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