The Chinese Ministry of Commerce reached a consensus to enhance dialogue and cooperation with South Korea, as they both look to reduce risk in their semiconductor supply chains. 

Concerns have been mounting over supply-demand disruptions, sanctions and national security in relation to the semiconductor supply chain.

Global demand surged with the COVID-19 pandemic driving up electronics sales and data-centre demand, while supply chain logistics were disrupted. This put pressure on every industry, including the behemoth automotive industry, which found itself competing with work-from-home technologies. Supply chain disruptions have since continued with severe weather issues in Taiwan and the Russian war in Ukraine.

The USA put pressure on China’s chip industry in October 2022 through a ban on Chinese companies from buying US-designed advanced chips and chip-making equipment without a license. These companies are largely dependent on the USA and its allies for chip design, the tools that make them, and fabrication. In the meantime, the USA is also creating incentives to onshore semiconductor facilities, including from Taiwan Semiconductor Manufacturing Company, announcing a further US$40Bn (Dec 2022) in its US production hub in Phoenix.

China’s discussions with South Korea represent a first step to ensuring enhanced security in their supply chains. South Korea already exports 40% of their chip production to China, however, is also dependent on the United States technology and equipment necessary for the major chipmakers Samsung Electronics and SK Hynix.