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Protect our semiconductors

Mar 29,2018
The United States and China are reportedly engaged in behind-the-scenes negotiations to avert a trade war, and the main bargaining chip is semiconductors. When they strike a deal of having China purchase more American semiconductors over suppliers from South Korea and Japan, the toll could fall heavily on Korea’s chip-making industry, which is responsible for the bulk of Korean exports.

The Wall Street Journal reported that Washington has asked Beijing to import more American cars and semiconductors to address its trade deficit with China. The Financial Times also reported that Beijing is tilting towards agreeing to reduce imports from Korea and Japan and use more American chips to avoid the threatening U.S. tariffs on Chinese products. Regardless of which side proposed it first, it appears that Korean chipmakers are caught in the crossfire of trade friction between the two largest economies.

It is not only extraordinary but beyond international commerce order for two countries to bargain over a mainstay export item of a third country for their bilateral trade settlement. Even if the two had not specifically mentioned Korean chips, raising the U.S. semiconductor share in the world’s biggest industrial and consumer market obviously would come at the expense of Korean makers. Global sales of dynamic random access memory (DRAM) powered computing is dominated by three major companies — Samsung Electronics (45.3 percent) and SK Hynix (27.8 percent) and one U.S. player Micron (22.1 percent).

The change would not immediately deal a blow on the Korean semiconductor industry, given the current tight supply situation. But once the semiconductor boom fizzles out and competition becomes fiercer over demand, Korean players inevitably will feel the squeeze. Semiconductors accounted for a whopping 17.4 percent of Korean exports last year. The allegedly unfair deal between the biggest economies could spread to other trade items. The Korean government and industry must raise their vigilance.

The international commerce market can be cruel. But there are orders and decorum to keep to. U.S. President Donald Trump talked of fair trade and China’s President Xi Jinping championed free trade. But is this the best the leaders of the superpowers can come up with? If the beggar-thy-neighbor policy is what they refer to as fair or free trade, they should go back to economic textbooks.


JoongAng Ilbo, March 28, Page 34