White House tried to enlist Samsung Electronics, SK Hynix and other semiconductor companies in its battle against BeijingThe White House has asked South Korea to urge its chipmakers not to fill any market gap in China if Beijing bans Idaho-based Micron from selling chips, as it tries to rally allies to counter Chinese economic coercion.
Four people who were familiar with the discussions between the White House in Seoul and the presidential office made this request at the time President Yoon Suk Yeol was preparing to go to Washington on a Monday for a State visit.
This month, China launched a review of national security for Micron . Micron is one of three major players on the global Dram Memory Chip market along with South Korea’s Samsung Electronics.
The Cyberspace Administration of China has not yet announced any punitive measures following its investigation. Micron’s stakes are high, as mainland China generated 25% of its $30.8bn revenue last year.
US officials and executives think that the CAC investigation is Beijing’s response to the aggressive measures taken by President Joe Biden in order to prevent from China obtaining or manufacturing advanced semiconductors.
The Micron case is a litmus-test to see if Beijing will take economic coercion against a US major company for the very first time.
People familiar with the matter say that the US asked Seoul to urge Samsung Electronics and SK Hynix not to increase sales in China if Micron was banned as a result.
Yoon’s arrival in Washington, D.C. on Monday coincides with the White House request. The US has been working with allies in the Indo-Pacific to counter China, but this is the first time that they have asked one of their allies to involve its companies in a security role.
Samsung and the South Korean Embassy in Washington did not respond when asked for comments. SK Hynix stated that it did not receive a request from South Korea’s government. Micron declined comment.
The White House didn’t comment on details, but did say that the Biden-Yoon administrations made “historic” progress in deepening their co-operation, especially on issues of national and economic security, and efforts to protect “leading edge technologies”.
The US National Security Council stated that this includes efforts to coordinate investments in the semiconductor industry, secure critical technology, and address economic repression. We expect that the state visit will further strengthen cooperation on all fronts.
Seoul’s response is not clear. The visit is being finalised by US and South Korean officials. The two countries are discussing a variety of issues, such as how to give Seoul greater assurances about the “extended deterrence”, the US nuclear umbrella. This is because tensions between North Korea and South Korea have been increasing.
Yoon is in a difficult position because of the Micron request. He was elected last year with a platform that many viewed as being more hawkish than his predecessor Moon Jae In’s. He exemplified his position by provoking an angry response from Beijing last week when he accused China of trying to change the status-quo over Taiwan “by violence”.
His administration also resented US efforts to rally its allies around its economic security agenda amid fears that US export controls could undermine the competitiveness of Samsung or SK Hynix on a long-term basis.
The US has some leverage. While Samsung and SK Hynix may not be happy about efforts to curb their business in China the US could have some. The US announced sweeping export controls for China in October last year. It granted South Korean companies that had chip manufacturing facilities in China exemptions from these controls. These waivers will need to be renewed in the coming months. The Commerce Department said that it did not have any updates on the situation.
The memory chip industry is already under pressure because of an oversupply. In the first quarter this year, Dram chips, used in everything from phones to TVs, saw a 25% drop in price.
Treasury Secretary Janet Yellen stated last week that Washington was concerned by “a recent increase in coercive measures targeting US companies”.
A person with knowledge of the situation stated that the Biden Team was “motivated” to make sure that China would not be able to leverage Micron to influence US policy.
He said that the US could stymie Chinese attempts at economic coercion if it showed Beijing that they would work with partners and allies to undermine such a move against American or other allied companies.
China has used economic pressure against Taiwan, as well as other countries such Lithuania and Australia. It has not taken any major actions against the US, despite Biden’s tough controls on chip exports and sanctions imposed on other Chinese firms.
A person who met with Chinese officials recently in Beijing expressed frustration at the US’s efforts to clamp down on Chinese firms, and suggested that it might consider retaliation.
The US request for Seoul highlights how the chips lie at the core of many of the most deep-seated faultlines between Washington, Beijing.
US placed Yangtze Memory Technologies Co in December on its “entity” list. The White House had called the Chinese memory chip manufacturer a “national champion”. This means that companies cannot export American technology to Micron’s nascent rival, without a difficult-to-obtain license.