SEOUL, South Korea — A brouhaha broke out in Seoul media after a leading daily claimed Dutch officials were irked by the excessive demands made ahead of President Yoon Suk Yeol’s state visit this week.
That captured headlines here. However, the wider issue — the chip strategies of the Dutch and South Koreans, key players in the hugely strategic chip sector — are their approaches to the China market at a time when the Biden administration seeks to apply maximum pressure.
During his visit, Mr. Yoon, who — unusually for a South Korean leader — has made diplomacy the centerpiece of his presidency, was photographed in an ASML clean-room. He also met with King Willem-Alexander and held talks with outgoing Prime Minister Mark Rutte before returning home on Friday.
While the report might irritate Mr. Yoon’s public relations team, officials on both sides are hoping it is a minor embarrassment given the bigger issues in play between two of the world’s critical players in the semiconductor manufacturing supply chain.
Chips, the de facto heart of all digitized hardware, have emerged as a key component in the struggle between Beijing and Washington for global economic supremacy. That struggle plays out across military, diplomatic, economic and cultural domains. Beijing accuses Washington of enlisting allies such as South Korea and the Netherlands to strangle China’s rise as a high-tech superpower.
The outcome of talks between Mr. Yoon — whose entourage included the heads of chipmakers Samsung Electronics and SK Hynix — and his Dutch counterparts was what both sides called a “semiconductor alliance.”
“Both leaders … reaffirmed their commitment to build a semiconductor alliance encompassing the participation of governments, businesses and universities,” a joint statement read. “In this vein, the two leaders agreed to establish a bilateral semiconductor dialogue and a Semiconductor Talent Program, and to continue and expand business-to-business cooperation.”
The two also agreed to oversee and ensure supply chain security.
The alliance makes sense, given that both nations are U.S. allies and key players in semiconductors and given that the two countries’ chip sectors are complementary rather than competitive: The Dutch position is upstream, the South Koreans’ is downstream.
The Netherlands’ AMSL is the world’s leading supplier of top-tier semiconductor manufacturing machinery, with a monopoly on extreme ultraviolet, or EUV, lithography machines which are indispensable for making the most advanced chips of below 5 nanometers.
South Korea’s Samsung Electronics and SK Hynix are key customers, given that they are the world’s largest and second-largest producers of memory chips, respectively.
Questions hang over whether PR-savvy politicians are needed to promote corporate ties — and over how, behind closed doors, the two administrations really feel about chips becoming centerpieces of U.S.-China competition.
During the trip, a memorandum of understanding was signed between AMSL and Samsung to build a $762 million joint research center in South Korea. Another MOU was signed between AMSL and SK Hynix on recycling hydrogen, a byproduct of chipmaking processes.
“They don’t need the government for that,” said Tokyo-based chip expert Scott Foster of the two corporate MOUs, which were likely agreed upon with little government intervention. “What probably needs investigating is that neither the Dutch or South Koreans, apart from some rabid politicians, are completely comfortable with having their tech industries on a short American leash.”
Diplomatically, the Biden administration is engaged in a long-term campaign to rally its democratic allies against China.
Financially, the CHIPS Act that Mr. Biden signed in August boosts chip production in the U.S., where both Samsung and SK Hynix are expanding operations. That potentially benefits the South Korean firms, as well as AMSL, which is positioned to sell machinery.
In terms of leverage, much of the intellectual property in the design and production of chips is in American hands. That is particularly true of AMSL, said Mr. Foster, a tech specialist at LightStream Research, which analyzes companies and sectors across Asia.
Some of the leading technologies and companies acquired by AMSL for its most advanced machinery were created by U.S.-taxpayer-funded research, or are U.S.-based.
“U.S. law says that any American technology comes under U.S. export restrictions,” Mr. Foster said. “The Dutch go along.”
In the wider competitive landscape, it is possible that South Korean firms, which operate massive chip fabrication plants in China but which make their most advanced products at home, are more wary of China than their Dutch partners.
“It is to the advantage of the Koreans to keep the Chinese a few steps behind them and you can see this in displays as well as chips,” Mr. Foster said. “But that is not true of the Dutch.”
• Andrew Salmon can be reached at asalmon@washingtontimes.com.
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