The Samsung veteran sounds the alarm that Korea is losing the global chip war

(Bloomberg) — During three decades at Samsung Electronics Co., Yang Hyang-ja helped shape the 84-year-old conglomerate’s current dominance in global memory chip manufacturing. Now she’s taking on a far broader challenge: ensuring Korea remains relevant as the US and China battle over semiconductors.

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Yang, who rose from a research assistant at the big company before leading its key memory chip development division, is the chief architect of a nationwide effort to finance and stimulate its domestic chip industry. Her mission is gaining in importance as the United States, China and Japan spend billions building up their own chip supply chains, making Korea̵[ads1]7;s future role in semiconductors unclear, she told Bloomberg Television.

It’s a matter of national security, she said, echoing the views of those in Washington and Beijing who are driving talent, money and political support into developing the silicon wafers that power future technologies from artificial intelligence and the next-generation metaverse. computing and – especially – military capacity.

“We are in a chip war,” Yang said in an interview in December. “Technological superiority is a way that our country can take the lead in any security-related agenda, such as diplomatic and defense issues, without being influenced by other nations.”

Yang, who heads a 13-member special committee President Yoon Suk Yeol’s ruling party formed this year to brainstorm a solution, has argued that only through strong and direct intervention can Seoul expand its position in the $550 billion global semiconductor industry. She is one of a growing number of global policymakers who have embraced technology protectionism after pandemic-driven logistics spin-offs highlighted countries’ interdependence for key electronic components. She has won an ally in Yoon, who has joined Yang’s calls for more policies to help the country’s homegrown chip sector, which includes SK Hynix Inc. as well as Samsung.

Her efforts may be beginning to bear fruit. Last month, parliament passed Korea’s version of the US Chips Act. Led by Yang, the move speeds up the approval process for building factories in the metropolitan area, while increasing the number of technology-specialized schools. Separately, parliament passed a first bill offering an 8% tax credit to large firms investing in semiconductor manufacturing, far less than Yang’s proposal of 20% to 25%.

These gestures are a far cry from the billions of dollars in subsidies that other countries are committing to chip manufacturing, Yang said, adding that short-term political interests are blinding other lawmakers in the National Assembly. Some of her peers, in turn, have argued that overly generous incentives threaten government finances and will only benefit large corporations.

On Tuesday, the Finance Ministry announced a plan to increase the tax break on large companies’ capex to as much as 25%. It is unusual for an administration to propose significant changes so soon after lawmakers have passed a bill.

Unless the government steps up its incentives, more Korean companies may move their large manufacturing facilities to the United States and bring their best engineers with them, Yang said. Samsung plans to build a $17 billion semiconductor plant in Texas and has floated the possibility of spending nearly $200 billion on a series of factories in Austin and Taylor.

Korea has a unique opportunity to buck this trend, Yang said. Taiwan – where Taiwan Semiconductor Manufacturing Co. is based – producing the majority of leading chips that control the latest iPhones, servers and supercomputers. That has sparked calls around the world to diversify production away from an island that China claims and has threatened to invade.

“Samsung is the only company in the world that can fill up for TSMC,” Yang said.

Yang, who first entered politics in 2016 at the encouragement of former President Moon Jae-in, is an independent lawmaker who left the Democratic Party in 2021 amid criticism over her response to a sexual assault case against one of her aides, who was also a relative. Yang later apologized. A police investigation yielded no charges against the lawmaker.

Chip policy is taking up her time now. Escalating sanctions against advanced technology are putting increased pressure on the country to choose between the United States, its security ally, and China, its largest trading partner. Both have asked South Korea to expand their chip manufacturing partnerships.

But Seoul has sidestepped explicit comments regarding its commitment to the Biden administration’s sanctions against the export of US-linked know-how to China.

The delicate situation highlights the need for Korea to build its own domestic technological capabilities — or risk becoming increasingly dependent on foreign powers, Yang said.

Now is the time to offer Korean companies more incentives to build manufacturing capacity at home, rather than abroad, Yang said. The country must do more to retain young talent, she said.

“How else would our country survive?” she said. “It would become a new technological colony.”

–With assistance from Emily Yamamoto.

(Updates detailing Korea’s revised chip bill)

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