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Seoul increases efforts to diversify supply chain in response to concerns about China – Radio Free Asia

South Korea is intensifying its efforts to diversify the supply chain for its semiconductor industry, among others, in a move to reduce its reliance on China for importing crucial materials necessary for its key sectors. 

South Korea has “completed” forming an alternative “global chip supply chain alliance that spans from design to materials, components, equipment, and manufacturing,” the South’s Presidential Office said in a statement Thursday.

The statement comes as South Korea’s President Yoon Suk Yeol and the Dutch Prime Minister Mark Rutte made a joint press conference in Amsterdam Wednesday, where they agreed to advance bilateral chips cooperation. 

Dubbed as the “chip alliance,” this includes a joint response to potential global supply chain crises.

South Korea and the Netherlands, including governments and companies, have signed a total of 32 Memorandum of Understanding (MOU) during Yoon’s state visit, including for cooperation in the supply chain of key items essential for semiconductor production.

The essence of this alliance is to build a cooperative relationship between the two countries, aimed at jointly addressing challenges in the semiconductor supply chain amid potential disruptions caused by China, a senior South Korean official in Seoul told Radio Free Asia, requesting anonymity due to the sensitive nature of the issue.

Seoul’s efforts

South Korea has heavily relied on China for essential components, such as strategic minerals critical for semiconductor manufacturing, while simultaneously seeking methods to secure and stabilize its supply chain. 

Former President Moon Jae-in’s government, for instance, focused on domestically producing key chip components amid its disputes with Japan over historical issues. 

However, with the current Yoon administration, the approach has shifted towards establishing an alternative supply chain among the like-minded democratic nations.

Seoul has already initiated discussions with the United States, Japan, and the United Kingdom, with the Netherlands being the most recent addition to this list.

Seoul’s efforts go beyond the semiconductor industry. In September, South Korea and Indonesia agreed to strengthen their cooperation in economic security, including establishing a secure ecosystem to produce hi-tech materials such as electric vehicles (EVs). 

Indonesian President Joko Widodo welcomes South Korean President Yoon Suk-yeol and his wife Kim Keon Hee, as they meet at the Presidential Palace in Jakarta, Indonesia, Sept. 8, 2023. (Antara Foto/Hafidz Mubarak A/Reuters)

South Korea’s move, recognizing Indonesia’s wealth in rare earth materials, aligns with the U.S. President Joe Biden’s strategy to build an alternative global supply chain linking democratic nations and reducing dependence on China. 

China, holding a dominant position in the global production and processing of rare earth materials, has weaponized the resource as a strategic leverage in international politics. Over the past few decades, Beijing has invested heavily in consolidating its position in the rare earth industry, enabling it to control over 80% of the world’s output.

Vocal against China

Recently, South Korea has become more outspoken on issues sensitive to China, including those concerning Taiwan, and multiple sources in the economic sector in contact with the Chinese embassy told RFA that Beijing perceives the current Yoon administration’s approach as “inappropriate.”

For instance, Yoon made comments about Taiwan in an interview with Reuters, ahead of his planned state visit to the U.S. in April, saying that the situation over the Taiwan Strait was a “global issue.”

The sources who spoke to RFA noted that meaningful economic cooperation can only advance if South Korea at least avoids commenting on sensitive issues, especially those pertaining to Taiwan.

However, the recent actions of the Yoon administration, particularly its efforts to reinforce ties with the U.S., suggest that Seoul will maintain its vocal stance on these matters. This underscores South Korea’s imperative to actively participate in developing a semiconductor supply chain, a vital component of its economy.

South Korea has already experienced Beijing’s unofficial economic retaliation in 2017, following its decision to deploy the U.S. Terminal High Altitude Area Defense, or THAAD, system in its soil. Beijing sees the deployment of the system as a direct threat to its national security, claiming that its radar could monitor its military activities in its mainland. 

The measures included an unofficial banning of Chinese tourists to South Korea, as well as imposing informal sanctions targeting South Korean businesses, particularly in the entertainment and retail sectors.

Edited by Taejun Kang and Elaine Chan. 

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