Samsung veteran sounds alarm on South Korea losing global chip war

SEOUL – In three decades at Samsung Electronics, Ms Yang Hyang-ja helped shape the 84-year-old conglomerate’s present dominance in global memory chipmaking. Now, she is taking on a far broader challenge: ensuring that South Korea remains relevant as the United States and China fight over semiconductors.

Ms Yang, who rose from a researcher’s assistant at the storied company before heading the key memory chip development division, is the lead architect of a nationwide effort to fund and galvanise its domestic chip industry. Her mission is surging in importance as the US, China and Japan

pour billions into building up their own chip supply chains,

clouding South Korea’s future role in semiconductors, she told Bloomberg Television.

“We are in a chip war,” Ms Yang said in a December interview. “Technology supremacy is a way that our country can take the lead in any security-related agenda, such as diplomatic and defence issues, without being swayed by other nations.”

Ms Yang, who leads a 13-member special committee that President Yoon Suk-yeol’s ruling party formed this year to brainstorm a solution, has argued that only through strong and direct intervention can Seoul expand its position in the US$550 billion (S$737.7 billion) global semiconductor industry.

She is one of a growing number of global policymakers who have embraced tech protectionism after pandemic-driven logistic snarls highlighted countries’ dependence on one another for key electronic components. She has won an ally in Mr Yoon, who has joined Ms Yang’s calls for more policies to help the country’s home-grown chip sector, which includes SK Hynix.

Her efforts may be starting to bear fruit. Last month, Parliament passed South Korea’s version of the US Chips Act. Spearheaded by Ms Yang, the move expedites the approval process to build factories in the metropolitan area, while increasing the number of tech-specialised schools. Separately, Parliament passed an initial Bill offering a tax credit of 8 per cent to big firms investing in semiconductor manufacturing, far smaller than Ms Yang’s proposal of 20 per cent to 25 per cent.

Those gestures are a far cry from the billions of dollars in subsidies that other countries are committing to chip production, said Ms Yang, adding that short-term political interests are blinding fellow lawmakers at the National Assembly. Some of her peers have argued, in turn, that overly generous incentives threaten government finances and would only benefit big companies.

On Tuesday, the Finance Ministry announced a plan to increase the tax break on big companies’ capital expenditure to as much as 25 per cent. It is unusual for an administration to propose substantive changes so soon after lawmakers pass a Bill.

Unless the government steps up its incentives. more South Korean companies could move their major production facilities to the US and take their best engineers with them, Ms Yang said.

Samsung plans to build a US$17 billion semiconductor plant in Texas,

and has floated the possibility of spending almost US$200 billion on a series of plants in Austin and Taylor.

South Korea has a unique opportunity to counter this trend, she said. Taiwan – where Taiwan Semiconductor Manufacturing Company (TSMC) is based – produces the majority of leading-edge chips controlling the newest iPhones, servers and supercomputers. This has triggered calls worldwide to diversify production away from an island that China claims and has threatened to invade.

“Samsung is the only company in the world that can fill in for TSMC,” said Ms Yang.

Escalating sanctions on advanced technology are putting increased pressure on the country to choose between the US, its security ally, and China, its biggest trade partner. Both have asked South Korea to expand chip production partnerships.

But Seoul has sidestepped explicit comments regarding its commitment to the Biden administration’s sanctions on exports of US-affiliated know-how to China.

This delicate situation highlights the need for South Korea to build its own domestic technological capabilities – or risk growing ever more beholden to foreign powers, Ms Yang said.

This is the time to offer South Korean companies more incentives to build production capacity at home, rather than abroad, said Ms Yang, adding that the country needs to do more to keep young talent.

“How else would our country survive?” she said. “It would become a new technological colony.” BLOOMBERG