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By Kim Hyun-bin
The United States' move to exclude China from global supply chains will likely benefit Korean semiconductor and secondary battery businesses, according to analysts and industry officials, Wednesday.
"The U.S. is trying to bolster its position through regulations that will impede Chinese companies as it seeks to maintain its technological hegemony. As part of its strategy the U.S. is trying to bring Korea in on its U.S.-centered global supply chain, making our relations with China even more difficult," a Korea Chamber of Commerce and Industry official said. "The U.S. is providing incentives, subsidies and tax breaks which could be seen as an opportunity for Korean firms but on the other hand, we worry about the impact on Korean companies that have factories or plans to build plants in China."
However, as the U.S. tightens regulations on China, there are also suggestions that the Korean semiconductor and secondary battery industries could benefit.
"There is the possibility of Korean companies' competition being reduced in the mid-to-long term due to the regulations slapped on Chinese firms by the U.S., which is expected to result in positive returns," Kim Yang-jae, a researcher at DAOL Investment & Securities said, Wednesday.
The analysts pointed out that the regulations came at a time when the Chinese government was scheduled to make massive investments in the secondary battery field just like it did in the display sector.
"There were Korean companies that withdrew their business in the past as Chinese display companies secured industrial leadership after making large-scale investments due to the support of their government," Kim said. "The semiconductor and secondary battery industries are also in a similar situation where the technology gap between Korea and China has narrowed and large-scale investments by Chinese competitors are just around the corner."
The U.S. has slapped several key sanctions to contain China's dominant presence in the industry.
The U.S. passed the CHIPS Act, which includes restrictions on investment in mainland China and led efforts to establish the CHIP4 alliance between major global semiconductor players such as the U.S., Korea, Taiwan and Japan to further contain China.
In addition, the U.S. also announced a ban on the export of key semiconductor equipment, materials and software that prevents Chinese companies from expanding their facilities.
The analysts pointed out that the sanctions come after thorough calculations and review.
"The U.S. government's sanctions policy on China was implemented after reviewing various scenarios for at least two years," Kim said.
In April last year, the Biden administration signed an executive order to inspect the supply chain for four major items: semiconductors, rechargeable batteries, biotechnology and rare earth metals. The key was to reduce dependence on China for future industries and expand domestic production.
"(The restrictions on the export of) rare earth metals were the most effective countermeasures in the past (on China) but the U.S. started producing rare earth metals and had already secured an adequate stockpile, so their effectiveness decreased," Kim said.
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