The US Blocking China's Semiconductor Rise: Impact on South Korea

[Asia Economy Reporter Changhwan Lee] The United States is intensifying its economic sanctions against China. The U.S. is particularly continuing sanctions on China's electronics industry, including semiconductors, smartphones, and telecommunications equipment, which China is focusing on as future growth engines. Experts see the U.S. pressure on China as having a dual nature, with both positive and negative impacts on Korean companies and the economy.

According to industry sources on the 6th, the U.S. Department of Defense added four Chinese companies to its blacklist on the 3rd, classifying them as entities owned or controlled by the Chinese military.

The companies newly blacklisted include China's largest semiconductor foundry SMIC, major oil company China National Offshore Oil Corporation (CNOOC), and China International Electronic Commerce Center Group (CIECC). This brings the total number of companies on the U.S. Department of Defense blacklist to 35.

Among them, SMIC is at the forefront of China's semiconductor ambitions. With a low semiconductor self-sufficiency rate, China has invested astronomical budgets to promote its semiconductor industry. However, it is assessed that China's semiconductor ambitions are facing significant difficulties due to U.S. sanctions.

Many Chinese electronics companies, including Huawei, which is already under U.S. sanctions, receive semiconductor supplies through SMIC, but due to U.S. sanctions, they may have to seek other foundry companies in the future.

Foreign media report that Chinese electronics companies are already diversifying their supply chains through foundry companies in Taiwan and Korea. Accordingly, there is an assessment that U.S. sanctions on SMIC could have some positive effects on Korean foundry companies.

A semiconductor industry official said, "As U.S. sanctions on SMIC intensify, in the mid to long term, SMIC's customers are likely to leave and turn to other foundry companies."

Considering the recent situation where the foundry industry faces high demand but supply shortages, customer departure could accelerate. In recent years, orders have surged, and the foundry industry has grown significantly every year. Top foundry companies like TSMC and Samsung Electronics are responding by expanding their factories. As a result, U.S. sanctions on China could represent an opportunity for foundry companies in other countries.

However, the negative impact of U.S. sanctions on China on the Korean economy is also significant. Since China is Korea's largest export market, a downturn in the Chinese economy would have a substantial adverse effect on the Korean economy.

In fact, when the U.S. sanctioned Huawei, Huawei's smartphone sales declined, leading to a significant reduction in Huawei's imports of Korean displays. Consequently, the smartphone OLED (organic light-emitting diode) market this year has worsened compared to last year.

The conflict between the U.S. and China is expected to have a broad impact beyond just semiconductors, affecting the entire industry. Research institutions such as the Bank of Korea and the Korea Development Institute (KDI) have projected that as the U.S.-China trade conflict intensifies, the slowdown in Korea's GDP growth rate will also increase.

An official from the business community said, "As the U.S.-China conflict continues, Korean industries are experiencing various large and small impacts. Given that our industries are export-oriented, it is impossible to avoid these effects."

This content was produced with the assistance of AI translation services.