[칼럼] World Story 7 - Vision 7  by Atty Jeong-kee Kim

(NewsKorea=Seoul) Digital News Team = World Story 7 - <Vision 7  by Atty Jeong-kee Kim>

● When Will the US-China Technology War End?

The US-China technology war, especially the US-China semiconductor war, places Korea in a difficult position as it operates large production facilities in various Chinese cities such as Suzhou, Wuxi, Xi'an, and Dalian. With semiconductors being the "rice" of the information technology era industry, China uses its strength in the consumer market to threaten, while the US, as a key player in semiconductor fabrication, applies pressure. Moreover, the US is linking economic issues with national security concerns by forming an economic security alliance with Korea and Japan. For Japan, which has experienced a "lost 30 years" due to its economic issues, this situation serves as a cautionary tale. The historical events such as the 1985 Plaza Accord and the 1986 US-Japan Semiconductor Agreement, which made Japan a victim of US protectionist measures, should be remembered. Is there no leader in Korea who can exercise Solomon-like wisdom in the dilemma of "market vs. technology"? Korea needs survival strategies to navigate the US-China economic war (trade war, technology war, and ultimately, financial war) that will continue until China's 100th anniversary in 2049.

The US-China technology war began in earnest when Xi Jinping was elected as China's top leader after Deng Xiaoping, Jiang Zemin, and Hu Jintao, and set the goal of achieving manufacturing superiority by 2025. The core of the US-China technology war is 5G, or fifth-generation mobile communication technology. The US, as the country that led the second and third industrial revolutions and dominates nearly all new technologies, has overwhelming control over the global intellectual property market. Even though the US also leads in the fourth industrial revolution, it conceded the 5G technology infrastructure to China. In other words, China, as a latecomer to industrialization, achieved success in the 5G equipment and network industry through significant national investment in fourth industrial revolution-related industries. Thanks to this, China's Huawei rapidly grew to become the top company in this sector. The US does not have a 5G communication equipment company, and China cannot produce semiconductors. The US has restricted semiconductor supplies to China in order to prevent China from gaining an advantage.

Specifically, the US has implemented measures requiring foreign semiconductor companies to obtain US government approval to sell products to Huawei if they use even partial US technology. Previously, semiconductor companies from other countries could freely sell products to Huawei if their use of US technology was below 25%, but this loophole has been completely closed. Since there are no semiconductor companies globally that do not use US software, technology, or equipment, the US has effectively given Huawei a "death sentence." As a result, Huawei has become unable to source essential semiconductor components for its key products such as smartphones, laptops, tablets, smart TVs, base stations, communication equipment, and servers. Violating these regulations would result in foreign companies facing criminal penalties, including up to 20 years in prison and fines of $1 million (13.8 billion won) per violation, so compliance was inevitable.

Did Huawei, sentenced to death by the US, shut down? Absolutely not. It merely experienced a slowdown in growth. A Western company would have already gone bankrupt under such circumstances. Huawei, being closely tied to the Chinese government, was able to survive. Although it appears to be a private enterprise, it is essentially a state-owned enterprise controlled by the Chinese Communist Party. The Chinese government, holding the financial reins of the manufacturing nation, would not let Huawei, a representative company of the "Manufacturing Power 2025," die. So what did it do? After being notified by Taiwan's TSMC and Samsung that they could not provide foundry services, Huawei, with the support of the Chinese government through investment, financing, and tax incentives, embarked on an aggressive de-Americanization of semiconductors, meaning thorough domestic production. They started a semiconductor manufacturing project that is completely free of US technology (USA Tech Free). The government decided to provide unlimited support for technology and product production rather than mass production and profits. At that time, Huawei's first-stage goal was to build a 28-nanometer factory without US technology, the second-stage goal was to achieve 14-nanometer, and the third-stage goal was to achieve 7-nanometer technology. While the industry estimated that it would take at least five years, Huawei and China found themselves in a crisis situation where they had to halve the timeline. Among Chinese leaders, achieving semiconductor independence from the US was considered as important as creating an atomic bomb, and there was a prevailing belief that success in semiconductor manufacturing would mean victory in the technological hegemony competition with the US. At that time, I predicted that since China was the only country to fully domesticate equipment and chips for satellites and spacecraft, the US's extreme pressure might actually accelerate China's semiconductor ambitions.

And sure enough, after years of hard work, Huawei launched the high-tech smartphone 'Mate 60 Pro.' Previously, US sanctions had prevented China from producing advanced products below 14-nanometer by blocking technology, equipment, and product exports. However, Chinese foundry SMIC managed to produce 7-nanometer chips using existing deep ultraviolet (DUV) lithography equipment from Dutch semiconductor equipment maker ASML, instead of the targeted extreme ultraviolet (EUV) lithography equipment. Of course, there are significant cost burdens and lower yields, which means the marketability is noticeably reduced. In other words, SMIC's process has technical competitiveness but is an inefficient method of implementing 7-nanometer technology. Nonetheless, what is impressive about Huawei is that it managed to overcome the US's technology blockade by implementing 7-nanometer processes with outdated technology. Since they have achieved 7-nanometer processes even at a lower level, domestic production will advance more quickly. Huawei's domestic production rate will reach 27% by 2027, two years after China's manufacturing leap, and will rise to 50% in the medium to long term. However, semiconductor independence without foreign technical support is not possible, as subsequent processes are meaningless if specific processes are not supported.

In conclusion, the US-China technology war was already anticipated. The country holding hegemonic power will never relinquish its top position. In terms of technology war alone, the US missed the opportunity to control China owing to the 2008 financial crisis. Therefore, while the US's comprehensive pressure can delay China's technological progress in the short term, it cannot fundamentally prevent it. China will continue its evolution as a technology power according to the laws of challenge and response, and its peak will be in 2049, the 100th anniversary of the People's Republic of China. The truth of history is that technology cannot be defeated by the market. Although China may be able to rival the US, it will be difficult to surpass it as a technological superpower. Future Korea will need to find survival strategies right here.

☆ Author:  Atty Jeong-kee Kim ☆

● Education
- Bachelor of Arts in Political Science, Summa Cum Laude, State University of New York at Stony Brook
-  Doctor of Jurisprudence, Marquette University Law School
- Senior Executive Program, John F. Kennedy School of Government, Harvard University
- Research Scholar in North Korean Studies, Peking University

● Experience
- Consul General of the Republic of Korea in Shanghai
- Commissioner General for the Korean Pavilion at the 2010 Shanghai Expo
- CEO, Asia-Pacific Local Government Network for Economic and Social Development (CityNet)
- Secretary General, World Smart Sustainable Cities Organization(WeGO)
- Law Clerk, Milwaukee Circuit Court, USA
- Senior Attorney-at-Law, Dr & Aju LLC
- Distinguished Visiting Professor, World Economy Research Institute, Nanjing University
- Research Professor, Institute of Oriental Studies, Peking University
- Distinguished Professor, Graduate School of Political Science, Kookmin University
- Chair Professor, Graduate School of Business, Dongguk University
- First President of Soongsil Cyber University

● Publications
- Georo English Studies Series for College Students [10 volumes] (Georo Publishing)
- I Challenge the Possibility of One Percent (Chosun Ilbo)
- The Art of Negotiation (Cheongnyonneongsin Publishing)
- Korea and the World (Chekmidum Publishing)