Following the G7 Summit held May 19–21 in Hiroshima, the geopolitical war surrounding semiconductors is heating up in Northeast Asia. In response to the increasing intensity of sanctions from the US, China recently launched a counterattack by imposing trade curbs on Micron Technology, sparking concerns about how Taiwan, Japan and South Korea will navigate their positions in the midst of this situation.
Samsung to invest in Japan as Tokyo-Seoul relationship is thawing
South Korean president Yoon Suk Yeol and Japanese prime minister Fumio Kishida held a joint press conference in early May, revealing the possibility of a semiconductor alliance between both countries. The conference was followed by Japanese media reports that Samsung Electronics is likely to invest US$220 million to set up a semiconductor R&D and manufacturing base in Yokohama City, with the Japanese government expected to provide Samsung with one third of the investment in financial subsidies.
Samsung's semiconductor business was launched in February 1983 following a "Tokyo Declaration" issued by its founder Lee Byung-chul. In 1997, Samsung R&D Institute Japan (SRJ) was inaugurated to carry on semiconductor R&D in Japan. In March 2023, Samsung consolidated its small research facilities in Yokohama, Osaka and other locations into the Device Solution Research Japan (DSRJ), based in Yokohama.
The Japanese government may intend to win over Samsung and accelerate the revival of its semiconductor industry. While companies like TSMC and Micron have already been subsidized to set up manufacturing plants in Japan, attracting major South Korean semiconductor players to do so is also believed to be part of Japan's semiconductor revitalization program.
South Korea and Samsung get what they need
Samsung's investment in Japan can be seen as a double-edged sword. The advantages include strengthening backend process R&D, and disadvantages include advanced process technology and talent facing the risk of outflow.
Samsung establishing R&D bases in Japan may incur the risk of technology and talent drain, but its most advanced memory technology now available in South Korea seems unlikely to be leaked out, given that Japan's current semiconductor enhancement strategy does not have much focus on memory, a sector where Samsung excells.
As South Korea and Samsung are actively strengthening the competitiveness of system semiconductors, investing in Japan will help sharpen their competitive edge in system semiconductor materials, components and equipment, and absorb related technologies from Japan.
For a long time in the past, Japan and South Korea seldom cooperated in technology. However, with relations between both countries thawing recently, news of Samsung's potential investment in Japan has emerged. This signifies that Samsung or other South Korean conglomerates are expected to actively seek collaboration with more prospective Japanese partners in the future to reap mutual benefits.
Wafer foundry operators in Taiwan must pay more attention to the fact that Samsung's investment in Japan could be primarily designed to improve its backend process technologies.
Compared to the internalization of memory packaging, the wafer foundry sector requires the support of various packaging process technologies. When it comes to backend process, cooperating with external parties, instead of relying on internal development, will be a shortcut to rapidly improve competitiveness.
South Korea struggles to survive while caught in the squeeze between two major powers
The global semiconductor industry is experiencing significant tremors as Taiwan, Japan, and South Korea find themselves in a delicate position. They are aligning with the US stance to ensure their security interests on the one hand, and must also tread carefully to avoid angering China on the other. In the realm of international politics, the US is trying to create a new semiconductor supply chain dominated by democratic countries and excluding China, and therefore if any of the three countries fails to take clear stance in the democratic camp, it may face greater risks.
The South Korean semiconductor industry remains entangled within the geopolitical framework of China, the US, Taiwan, Japan and other countries. In the past, the trade war between Japan and South Korea led the latter to consider a path of self-sufficiency and domestic production. But under the facilitation of the US, South Korea is now strengthening cooperation with Japan; and with the rise of global semiconductor protectionism, Samsung and South Korea are attempting to transform their previous awkward positions into bargaining chips.
In the recent G7 summit, the joint statement, for the first time ever, mentioned supply chains and other economic security issues. And on the eve of the conference, Japanese prime minister Fumio Kishida made a significant move by inviting top executives from companies such as Samsung, TSMC, Intel, and Micron for a meeting, urging them to expand their investments in Japan.
Following China's recent trade curbs on Micron, it became apparent that even without the US memory vendor, there are still Samsung and SK Hynix in the memory market and therefore China has little to worry about supply shortages, especially it is now a buyer's market. Beijing's sanction against Micron not only expresses its strong dissatisfaction with Washington, but also aims to exert pressure on South Korea to make a choice between China and the US.
However, it was reported that the US has asked the South Korean government to have its memory suppliers not to fill the supply gap left by Micron. With Micron sanctioned, Samsung and SK Hynix stand a good chance to benefit from the China market in the short term, but the "political consequences" of actively taking this opportunity will translate into heavy pressure on them.
Samsung is building a new wafer foundry fab in Taylor, Texas in line with the semiconductor supply chain restructuring in the US. In this context, Samsung getting closer to Japan means increasing its leverage against the US. Samsung requires materials and equipment from Japan, and cooperating with Japan, which possesses core equipment manufacturing technology, is tantamount to buying an extra insurance policy for itself.
Article translated by Willis Ke
