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K-Semiconductor Survival Strategy: U.S.-China Technological Hegemonic Competition and Korea’s Strategic Choices |
| December 16, 2025 |
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Byung-chul LeeVisiting Research Fellow | bcclee65@naver.com
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Semiconductors are often described as the lifeblood of the 21st century digital civilization. Nearly every domain of modern life, ranging from smartphones, automobiles, and home appliances to medical devices and weapons systems, relies on semiconductors. As the era of artificial intelligence(AI) accelerates, the strategic value of high-performance semiconductors continues to rise. Global semiconductor sales in 2024 totaled approximately $628 billion (according to the Semiconductor Industry Association), and further growth is expected amid surging demand for AI chips. Beyond constituting a large global market, semiconductors are core components of advanced weapons systems, supercomputers, and AI platforms, directly linking them to national security.
As U.S.–China tensions intensify, the United States has urged its allies to decouple supply chains from China, while China is moving aggressively toward semiconductor self-sufficiency. The South Korean semiconductor industry finds itself at the center of these competing pressures.
The author, a former vice president of Samsung Electronics, worked at Samsung Group’s China headquarters from 2005 to 2020 and observed firsthand China’s technological rise. The author recently published K-Semiconductor Super Gap Strategy, and this paper draws on the book’s core arguments to analyze the realities of U.S.–China technological competition and to present survival strategies for South Korea’s semiconductor industry. -
As strategic competition between the United States and China intensifies, semiconductors have become a frontline arena of rivalry between the two countries. Whereas oil was central to geopolitics in the twentieth century, advanced technology, particularly semiconductors, has assumed that role in the twenty first century. The author refers to this convergence of technology and geopolitics as “Techno-Geopolitics,” reflecting the emergence of a new form of international politics centered on technological leadership.
There are clear reasons why semiconductors have emerged as strategic assets. Advanced semiconductors go beyond being industrial inputs. They define the computational capabilities of AI systems and the operational capacity of military information systems. Control over semiconductors has thus become not merely a matter of industrial policy, but a core instrument in hegemonic competition over technological leadership and the restructuring of the international power structure.
South Korea stands at the center of this techno-geopolitical environment. Samsung Electronics and SK hynix rank first and second globally in the memory semiconductor market, and Samsung also ranks second worldwide in the foundry(contract manufacturing) sector. The two firms together account for more than 70 percent of the global DRAM market and over 50 percent of the NAND flash market.
The advent of the artificial intelligence era has further increased the strategic value of semiconductors. High-bandwidth memory(HBM), which is essential for artificial intelligence training and inference, is currently led technologically by South Korean firms. SK hynix and Samsung Electronics together hold roughly 90 percent of the HBM market, effectively forming a duopoly. As demand for artificial intelligence semiconductors, which are central to the fourth industrial revolution, expands rapidly, the importance of South Korea’s semiconductor industry continues to grow.
As South Korea’s technological capabilities increase, so do the attention and pressure from both the United States and China. The United States seeks to incorporate South Korean firms into its supply chains while tightening semiconductor controls on China. China, while pursuing semiconductor self reliance, also exerts pressure to prevent South Korea from aligning excessively with the United States. Caught between the two major powers, South Korea faces a dilemma in which it can neither fully choose nor fully reject either side. In this context, the central question of this paper is how South Korea’s semiconductor industry can sustain its competitiveness while navigating intensifying geopolitical pressures. -
The United States is applying comprehensive pressure to impede China’s efforts to advance its semiconductor industry. The export controls on semiconductors to China announced by the Biden administration in October 2022 have been assessed as among the most stringent measures to date. These controls effectively block exports of advanced semiconductors and manufacturing equipment to China and prohibit United States persons from working for Chinese semiconductor firms. Earlier, in August 2022, the United States enacted the CHIPS and Science Act, establishing approximately 52.7 billion dollars in policy funding and promoting domestic semiconductor production alongside a friend-shoring strategy.
The Biden administration pursued a “carrot-centered strategy” under the CHIPS Act that combined subsidies and tax credits. While the second Trump administration has expressed critical views regarding the implementation of subsidies under the CHIPS Act, it has adopted an approach that seeks to adjust or use the law as a negotiating instrument rather than abolish it. With respect to export controls, assessments indicate that the administration has taken a more “transactional approach” than the systematic expansion of controls seen under the Biden administration, including easing restrictions on certain items such as the NVIDIA H200. Nevertheless, both administrations appear aligned in maintaining pressure on China and supporting domestic semiconductor capacity.
The United States Department of Commerce designated the Xi’an operations of Samsung and the Wuxi operations of SK hynix as Validated End Users(VEU) in 2023, temporarily allowing the transfer of equipment to their facilities. However, as the United States has indicated that VEU and waiver measures may conclude at the end of December 2025, the structure of restrictions may make equipment upgrades at facilities in China progressively more difficult. In addition, the second Trump administration has publicly raised the possibility of imposing tariffs on semiconductors imported into the United States from allies such as South Korea and Taiwan, while encouraging the relocation or expansion of production facilities in the United States. This reflects a dual-track approach that directly pressures China while seeking to integrate South Korean and Taiwanese firms more deeply into supply chains centered on the United States.
China has also advanced its own policies. The Made in China 2025 initiative announced in 2015 designated self reliance in key manufacturing technologies, including semiconductors, as a national strategic priority. More recently, China has continued policies aimed at strengthening advanced manufacturing and technological innovation under the concept of “New Quality Productive Forces(新质生产力).” The National Integrated Circuit Industry Investment Fund, often referred to as the Big Fund, raised approximately 48 billion dollars in its first and second phases (140 billion + 200 billion yuan), and launched a third phase in 2024 amounting to 344 billion yuan, bringing cumulative national level funding to roughly 95 billion dollars. In 2020, China also announced a policy granting a ten year corporate income tax exemption following the realization of profits for semiconductor production at 28nm and below.
China defines semiconductors as a representative choke point(卡脖子) technology, meaning a core technology whose external dependence could constrain national development, and is mobilizing national resources to advance self sufficiency in this sector.
As a result of these efforts, progress toward semiconductor self-sufficiency is becoming visible. A representative case is the memory sector, where South Korea has held a dominant position. The Chinese DRAM producer CXMT expanded monthly wafer capacity from roughly 100,000 wafers at the end of 2023 to approximately 160,000 to 170,000 wafers by the end of 2024. Capacity is projected to reach about 200,000 to 240,000 wafers by the end of 2025 and 350,000 wafers by 2028, potentially accounting for around 14 percent of global market share. Its technological level is assessed to have narrowed the gap to approximately four to five years behind leading firms. Meanwhile, YMTC began mass production in January 2025 of 232 layer(active) 3D NAND, narrowing the gap in layer count with global leaders to roughly one year. However, the prevailing expert assessment holds that a gap of about two to three years remains in overall performance, including yield, endurance, I/O performance, and controller optimization. Projections therefore suggest that within several years Chinese firms may approach the technological level of South Korean companies not only in layer count but also in overall performance.
The number of Chinese fabless(design expertise) firms increased from approximately 1,380 in 2017 to 3,626 in 2024, an increase of more than 2.6 times. Each year the net increase roughly equals the total number of fabless firms in South Korea, which is about 200, and technological capabilities are advancing rapidly. Representative firms include Huawei HiSilicon(mobile AP, AI accelerators), Biren(GPU), Cambricon(NPU), Horizon Robotics(AI chips), and Moore Threads(GPU). These firms have already begun competing intensively with United States companies.
An important point is that the growth of the fabless sector plays a decisive role in enhancing the competitiveness of major industries such as smartphones, automobiles, consumer electronics, telecommunications equipment, and industrial machinery. Semiconductor chips designed by fabless firms function as the brain and core component of these products, shaping performance and the pace of innovation. Thus, the development of the fabless sector contributes not only to the success of individual semiconductor companies but also to innovation across the national industrial base.
China’s technological potential should not be underestimated. China graduates approximately 12 million university students each year, including about 5 million in science and engineering fields, roughly eight times the scale of the United States. The number of STEM doctoral graduates in China exceeded 50,000 in 2022 and is projected to reach 70,000 by 2025. Another notable trend is the return of overseas talent. Following the launch of the United States “China Initiative” aimed at identifying espionage in research institutions in 2018, many Chinese origin scholars returned to China. These returnees train younger researchers domestically, who in turn cultivate the next generation, forming a reinforcing cycle of talent development.
Given the scale of the science and engineering workforce and the capacity to mobilize national capital, China is likely to narrow the gap with the United States gradually. Once China reaches a certain threshold in advanced technologies such as semiconductors, it may be more inclined to mount a more assertive response toward the United States. Potential instruments of pressure include export controls on rare earth elements and critical minerals, as well as restrictions on access to China’s domestic market. In particular, China accounts for roughly 70 percent of global rare earth mining, 60 to 70 percent of production, and about 90 percent of processing, giving it leverage that could affect the entire semiconductor supply chain. China has already established legal tools for countermeasures against the United States, including the “Anti-Foreign Sanctions Law,” the “Blocking Rules,” and the “Unreliable Entity List.” -
The U.S.-China semiconductor war has evolved beyond competition among firms into what can be characterized as a state level contest. With both Washington and Beijing deploying large scale state led policy financing, even highly competitive firms face difficulty prevailing without strategic backing from their respective governments. Corporate capabilities alone are increasingly insufficient to compete against state mobilized capital.
The United States is also pressing its allies to make choices. It has restricted the export of semiconductor equipment to China by the Netherlands based firm ASML and has urged Japan to participate in export controls on advanced DUV semiconductor equipment. For South Korean firms, receipt of subsidies for semiconductor facilities in the United States is accompanied by “guardrail” provisions that limit production capacity expansion in China above five percent for a period of ten years. Since imposing broad controls in October 2022 on the transfer of semiconductor chips and equipment to China, the United States has progressively tightened export controls in October 2023 and December 2024 and has expanded application of the Foreign Direct Product Rule(FDPR) to induce third countries to align with its measures. As a result, supplies of semiconductor chips to Chinese firms under United States sanctions, including Huawei, have been curtailed, and process upgrades and high bandwidth memory supply within China face direct constraints.
At the same time, China’s technological catch up and recruitment of foreign talent have intensified. Chinese semiconductor firms are offering highly attractive terms to South Korean engineers, in some cases proposing salaries three to five times higher than previous compensation. Concerns over technology leakage are growing.
Approximately 30 percent of semiconductor revenue for Samsung Electronics and SK Hynix has historically been generated in China, and dependence on the Chinese market remains particularly high in memory. Under these conditions, South Korea faces a dilemma in which it cannot readily forgo the Chinese market nor reject United States demands.
A further concern is the visible progress of China’s technological self reliance. As China undertakes large scale capacity expansion in mature process(legacy chip) semiconductors, demand in China for South Korean products could decline. Expansion of advanced semiconductor processes in China is constrained by United States pressure, while in mature nodes South Korean firms face price competition from Chinese producers. Since the second half of 2024, the memory market appears to have entered a super cycle driven by surging AI demand. The key question is how long this boom can continue, and there is a risk that a temporary upturn could obscure structural challenges in South Korea’s semiconductor industry. As fabrication facilities currently under construction in China come online, the semiconductor sector could experience price declines caused by oversupply, similar to what occurred previously in industries such as solar energy, steel, and chemicals. This represents a significant structural challenge facing South Korea’s semiconductor industry. -
In an era of state-level competition, corporate efforts alone are insufficient. The state must assume a central role. As the United States and China mobilize national capabilities to support their semiconductor industries, South Korea cannot remain competitive if responsibility is left solely to firms. The author presents four core survival strategies for South Korea’s semiconductor industry.
First, establish a unified command center for semiconductor policy.
Semiconductor policy is currently dispersed across multiple ministries, including the Ministry of Trade, Industry and Energy, the Ministry of Science and ICT, the Ministry of Economy and Finance, and the Ministry of Education. When inter-ministerial coordination is weak or lines of authority are unclear, policy direction tends to drift. Consideration should be given to establishing a government wide control tower under the President, alongside a cooperative framework involving industry, academia, research institutions, and government. A unified long term national roadmap should be developed, and policy continuity should be maintained across changes in administration. It may be useful to examine institutions such as the White House Office of Science and Technology Policy in the United States and China’s Central Science and Technology Commission, both of which perform national level coordination and integration functions.
Second, national capabilities should be concentrated on maintaining a technological super gap and securing talent.
A technological super gap ultimately begins with a talented individual. Competitiveness in the semiconductor industry depends on the capability of engineers developing advanced processes and improving yields. South Korea is currently experiencing a net outflow of AI talent, and the overseas migration of highly skilled semiconductor personnel is also a serious concern. Beyond defensive measures to prevent outflows, leading domestic scholars should be retained and supported in systematically cultivating domestic talent. An offensive strategy to recruit distinguished overseas scholars is also necessary. Enrollment capacity in semiconductor-related academic programs should be expanded, industry academia cooperation programs strengthened, and exceptional incentives provided to attract top international talent. Strong national commitment and implementation capacity are required to position South Korea as a global hub for semiconductor talent.
Third, global diplomacy should be strengthened.
In the age of techno-geopolitics, official state diplomacy alone is insufficient. A two-track strategy is required in which the government exercises diplomatic negotiating power while firms leverage local networks and business relationships. National diplomacy should set the broader framework, while corporate diplomacy sustains practical relationships on the ground. In particular, under geopolitical constraints, firms that best understand industrial realities should strengthen their role as quasi-diplomatic actors and deepen coordination mechanisms with the government. Although U.S.-China competition presents risks, China’s reduced access to global markets may also create opportunities. To convert risks into opportunities, synergies between state diplomacy and corporate diplomacy must be maximized. While broader geopolitical trends may be difficult to alter, opportunities can often be found in operational and sector specific details.
Fourth, diversify the semiconductor supply chain and enhance self-reliance.
As U.S.-China technological competition intensifies, decoupling is likely to accelerate in advanced industries, even if complete separation does not occur. Excessive dependence on any single country constitutes a structural risk. Import diversification and domestic production capacity should be strengthened for rare earth elements and semiconductor materials, parts, and equipment. South Korea’s semiconductor industry currently relies heavily on lithography equipment from ASML in the Netherlands, manufacturing equipment from the United States, and critical materials from Japan. The vulnerability of this structure was exposed by Japan’s semiconductor materials export restrictions in 2019. Although full localization is difficult in the short term, self reliance should be increased gradually, beginning with the most critical areas. Strategic stockpiling of key resources should also be pursued in parallel. Institutional and legal support mechanisms should be reinforced to facilitate these efforts.
In the age of tech-politics, technology has become inseparable from diplomacy and security. Semiconductors are no longer solely a corporate issue but a matter of national strategy. The rules of the game have changed. Maintaining a technological super gap will depend on sustained national commitment to integrated governance, talent acquisition, strengthened global diplomacy, and supply chain diversification.
| Semiconductors at the Front Line of U.S.–China Strategic Competition
| U.S. Sanctions Against China and Rise of China’s Semiconductor Industry
| South Korea Under Pressure from Both Sides
| South Korea’s Survival Strategy: The State Must Take the Lead
※ The contents published on 'Sejong Focus' are personal opinions of the author and do not represent the official views of Sejong Institue
