[9th EAI Academy] II. Advanced Technologies such as Artificial Intelligence and Semiconductors, and Future World Politics

YouTube Link: https://www.youtube.com/watch?v=R5G6QaWVZrc

Video Script

Technological Advancement and Changes in Global Politics

Hello and welcome. Today's lecture will cover how technology is changing global politics and how it will continue to do so in the future. In previous years, this lecture was positioned towards the end of the course, following introductory topics or discussions on the influence of major powers. However, due to various circumstances, you will be hearing this lecture first.

Ten years ago, I doubt there was a separate lecture on technology at the Future Academy. Perspectives on technology and future world politics would have been quite different. However, since the emergence of Trump in 2017, technology has become a crucial element in the US-China competition, and IT itself has undergone revolutionary advancements. Do you recall the AlphaGo incident in 2016? You would have been in middle or high school then.

There was the match between Lee Sedol, a 9-dan Go player, and AlphaGo. After humanity's 4-1 defeat, the artificial intelligence boom began. Over the past decade, AI technology has advanced at an extremely rapid pace, transforming society. While it's difficult to say that society as a whole has been drastically altered yet, the signs are very significant. This is bringing about major changes not only in society but also in global politics.

Today, we will delve into these topics, focusing on artificial intelligence, semiconductors, and advanced technologies. We will examine the role technology has played in global politics and whether technologies prior to AI have altered world politics. For instance, nuclear weapons have had a profound impact on international relations; history would have unfolded very differently without them. We will discuss the influence of such technologies, the changes they bring to global politics, the recent landscape of US-China competition in advanced technologies and future prospects, and how technology will shape the future of world politics.

Let's begin by introducing why technology has been important in global politics. As mentioned earlier, nuclear weapons were highly significant. Even before nuclear weapons, information technology played a crucial role. You likely don't know what a telegram is. When I was in my 20s, even mobile phones didn't exist. We would go out in the morning and only share our day's experiences with friends in the evening.

It must have been frustrating not having a way to communicate if plans changed midway. However, life went on without major issues. For example, if I couldn't attend a close friend's wedding, I would send a telegram. The announcer would read the congratulatory message at the wedding, conveying the news. Nowadays, we'd contact them directly via mobile phone, but back then, information was utilized differently.

Information technology influenced the causes of World War I and the adversarial relationship that developed between the United States and the Soviet Union. Although allies during World War II, the US and the Soviet Union's relationship deteriorated during the post-war settlement. In this context, a telegram sent by a US diplomat named George Kennan contributed to shaping a perception of hostility towards the Soviet Union. He assessed that the Soviets harbored deep expansionist ambitions and advocated for a policy of containment, urging the US to closely monitor and restrain the Soviet Union.

This assertion significantly influenced American opinion leaders, leading to the formation of a hostile perception of the Soviet Union within the US. Furthermore, Germany, which initiated World War I, was concerned that the involvement of the United States, a military power, could be disadvantageous.

Germany employed a stratagem to prevent US intervention in the war. The German Foreign Minister sent a telegram to the German ambassador in Mexico. Since Mexico shared a border with the United States, Germany intended to instigate a war between Mexico and the US, thereby diverting American attention away from Europe. This telegram was intercepted by the British, ultimately leading the United States to decide to enter the war.

Thus, a single technology like the telegram had a significant impact on the history of global politics. The same applies to malaria treatments. Without effective malaria treatments, Western colonization of Africa would have been impossible. Africa was a perilous place, with 221 out of 224 Europeans dying from malaria.

Initially, the mortality rate for Europeans in Africa was extremely high. However, quinine, a malaria treatment, was discovered in traditional remedies used by indigenous African populations. Based on this, malaria treatments were developed, significantly reducing the mortality rate among Europeans.

Malaria prevention shots are essential when traveling to Africa. Like malaria treatments, telegrams, and nuclear weapons, such technologies have profoundly altered the course of global politics. However, despite their importance, the international political community did not pay much attention to technology.

Despite the significance of nuclear weapons, there was little interest in nuclear technology itself, with focus solely on the weapon's performance. Technology was perceived as a given, merely a tool to change circumstances, with insufficient recognition of its profound impact on international politics.

Background and Historical Context of the AI Competition

What is the reason behind the current intense focus on artificial intelligence by the United States and China? It is because AI is bringing about significant changes across society, including economic growth, military power, and the media landscape. Nations that effectively leverage AI will have an advantage in economic growth and military strength. Consequently, competition surrounding this technology is fierce. Have hegemonic powers always possessed the leading technology of their time? Not necessarily.

The Roman Empire, Persian Empire, and Chinese Empire were not the nations with the most advanced technology of their respective eras. The Mongol Empire, though for a short period, conquered vast territories and achieved hegemony, but this was not due to technological prowess. The same can be said for China's Four Great Inventions: papermaking, the compass, gunpowder, and printing.

We currently live in a Westernized society. Our methods of teaching, clothing, and everything else have been Westernized. If we had not been Westernized, we would be wearing traditional Korean hats (gat), wearing hanbok, and studying in traditional village schools (seodang). We are already Westernized, and it has permeated our lives to the point where we are no longer even aware of it.

Just 300 years ago, the world order was vastly different from today. The West led the Industrial Revolution, developing powerful weaponry, which it then used to invade other regions. Since the modern era, technology has become extremely important in global politics. While the nation with the most advanced technology has not always been the hegemonic power in global politics, this trend has become apparent since the modern era. According to the long-cycle leadership model, the leading technology or industry of an era is closely linked to global political hegemony.

Britain became a hegemonic power by leading the Industrial Revolution, driven by textiles and the steam engine. The railway and steel industries contributed to maintaining Britain's hegemony. The United States surpassed Britain and emerged as the global hegemonic power through technological revolutions in electricity, automobiles, and petrochemicals. The IT revolution, sparked in Silicon Valley in the 1980s, played a crucial role in maintaining American hegemony. In the 2020s, a transformation in new leading industries is underway, and the next hegemonic power will be determined by the nation that leads this transformation.

Whether the United States or China leads will determine the next hegemonic power. In the early 1900s, not many predicted that the United States would become the global hegemonic power. At that time, the U.S. possessed vast territory, but it was perceived as underdeveloped, having only recently gained independence from British colonial rule. Even Americans felt inferior due to their cultural backwardness, with the wealthy often marrying into British aristocracy to improve their social standing. However, in the late 1800s, with figures like Edison and Tesla active, the United States underwent rapid industrial development. This situation is analogous to China's current circumstances.

This is akin to the question of whether China can become a hegemonic power today. In the late 1800s, the United States experienced rapid industrial development after the Civil War, mirroring China's situation today.

Just as Europeans at the time viewed the United States as an unsophisticated nation, China today has aspects that fall short of being considered a developed country. However, in just 20 to 30 years, particularly through the two World Wars, the United States rose to become a hegemonic power and has maintained that hegemony for about 100 years. Considering this historical trajectory, there is a significant possibility for China to grow into a hegemonic power. Indeed, world history has repeatedly witnessed such transformations. During periods when Spain and Portugal held hegemony, Britain was merely a small island nation but grew into a world power through the Industrial Revolution. There exists a cycle of approximately 100 years in global political hegemony. At present, whether the United States will maintain its power, China will rise, or the U.S. will experience a resurgence are key points of observation, and these constitute the most significant topics in international politics.

The Advent of the AI Era and its Socio-Economic Impacts

It is difficult to predict the global landscape and the positions of the United States and China in 2050, approximately 30 years from now, and in 2075, 50 years from now. We must consider these possibilities and closely examine developments in semiconductors and artificial intelligence, as it is clear that these will become the new leading sectors. Why is artificial intelligence, among various technologies, receiving such attention?

In the early days of the IT revolution, personal computers emerged. For generations after professors, mobile phones were already ubiquitous by the time they were born. Around the age of ten, parents would buy them a mobile phone for communication. Few among you have likely experienced life without a mobile phone. However, you probably have no experience of living without one since middle or high school.

It would be difficult to imagine a world without mobile phones. Professors' generations are fortunate to have rich imaginations because they did not have mobile phones until university. Professors from the class of '83 submitted term papers written by hand. This was because personal computer adoption was not yet widespread. When writing their master's theses in 1989, they still wrote them on manuscript paper, and a part-time typist at a printing shop near the university would type them up.

Typed manuscripts were then used to create books. It was a very primitive method. After working for two years post-graduation, I went to study in the United States in 1991. There, assignments were naturally done on computers. From around 1994-95, when I began my thesis, the internet started to become available. We began searching for information online. In 1987, while studying in the U.S., I asked a fellow student from the class of '87, whom I had sent $300, to copy and send me relevant papers or books from America. Communication was difficult then, so we exchanged materials via mail. My master's thesis was written this way, but from my doctoral studies onwards, I utilized the internet.

The advent of the internet and smartphones served as a forward base for the AI era. The period when the internet and smartphones are fully utilized is predicted to be the AI era. Modern artificial intelligence is already causing many changes. Those who are interested will already know, but in the past, wars were fought with missile launches and troop deployments. Modern warfare involved air strikes followed by the deployment of aircraft carriers and ground troops, as exemplified by the Gulf War or the Iraq War. However, as AI becomes commonplace, the patterns of warfare will also change significantly. Many AI-powered weapons have already been developed and are in use.

AI weapons are being actively used in conflicts such as the Israel-Hamas war and the Russia-Ukraine war. In the past, accurately targeting moving objects was difficult, even with aiming. Now, drones track individuals, and AI systems analyze the environment to make rapid decisions in warfare. Decisions that once took hours for airstrikes are now made in minutes and executed immediately with the approval of a designated officer. This signifies the capability for precise strikes, akin to surgical removal of only cancerous cells, targeting specific individuals. In the past, eliminating Kim Jong-un would have required destroying the entire surrounding area, but now it is possible. This is thanks to artificial intelligence. You can find detailed information by searching for related news articles. Notably, 'Lavender' targets people rather than buildings or structures. It collects information on Hamas operatives, designates them as potential targets, tracks their movements, and attacks them.

The military approved this, but reports indicate an average error rate of 10% within a short span of 20 seconds. This has led to tragic incidents where innocent individuals were victimized. However, from another perspective, a 10% error rate is considered surprisingly low, suggesting potential for technological advancement. There is a video of Hamas's top leader fleeing underground and hiding, with a drone continuously tracking him. Eventually, his subordinates died, and in a state of resignation, he covered his face with a towel. The drone, despite attempts to evade facial recognition, identified him as human through other data, leading to an attack. Drones persistently track and eliminate targets. The nature of warfare is shifting towards eliminating only specific targets with minimal casualties.

The development of killer robots is accelerating, leading to significant changes in warfare. Many countries, including South Korea, the United States, China, and Israel, are discussing the introduction of AI in their military sectors. In the economic sphere, job displacement is the most significant issue. In the past, computer science majors had guaranteed employment, but now AI is taking over coding tasks, making employment more challenging. I myself am recently learning Python coding, and with apps, programming can be done easily.

Even individuals with no prior coding experience can create programs in a short time using AI. If errors occur, AI provides solutions. Therefore, I encourage you to try it. In the past, resolving coding errors required significant time investment, but now, if you show the error to AI, it will suggest solutions. Many such changes are occurring. The biggest problems are job reduction and the exacerbation of economic inequality. A small number of highly talented individuals receive high compensation, while the majority are left wondering what to do. Competition between nations is also intensifying.

The intensifying US-China competition is increasing costs. The US has banned the use of Chinese components, and China's import of American components is restricted, making globalization as it existed before difficult. While globalization peaked from 1980 to 2008, it has been declining since 2008. The global economy experienced rapid growth for 70 years from 1945, faltered in the 1980s, and then grew again through globalization. However, since the 2008 financial crisis, the trend of globalization has reversed, and the intensification of US-China competition has increased global economic instability.

In such times, economic changes are being distorted by US-China competition. Furthermore, artificial intelligence is widening the gap between developed and developing countries. Countries previously referred to as developing or Third World nations are now called the Global South. The development and dissemination of AI technology are led by developed countries and China, leaving the Global South marginalized and creating a significant issue of AI technological disparity. According to Wallerstein's theory, a core-periphery structure has existed since the 1400s, but the gap between developed and developing countries was not substantial at that time. The gap began to widen significantly in the latter half of the Industrial Revolution.

The gap between developed and developing countries widened considerably from the mid-1800s and expanded further with rapid growth after World War II. The IT revolution in the 1980s also contributed to this widening gap. Each emergence of new technology brought about changes in the economic paradigm, widening the gap, followed by a period of narrowing due to technology diffusion, and then a widening again with the advent of new technologies. The gap widened in the 1980s, and with the advancement of AI in the 2020s, the gap is expected to widen further. While inequality was once accepted as natural, the current level of inequality is so severe that it poses systemic problems. The stark disparities, such as those between 'dirt spoons' and 'gold spoons,' which are insurmountable through effort, threaten the prosperity and survival of the planet and can no longer be ignored.

Intensifying US-China Technological Competition and the Reorganization of Global Supply Chains

Discussions about killer robots are actively taking place, and this is attracting significant attention as it could drastically alter the nature of warfare. Not only South Korea but also countries like the United States, China, and Israel are discussing how to integrate artificial intelligence into their militaries. In the economic sector, job displacement due to AI is the most significant issue. Until recently, computer science majors were considered to have guaranteed employment, but now AI is taking over coding tasks, making employment more challenging. I myself am recently learning the basics of Python because apps make programming easy.

Even professors with no lifelong coding experience can quickly write Python code and create programs using ChatGPT. While errors may occur, if you paste the error message and ask, ChatGPT will provide solutions. Therefore, I encourage you to try it. In the past, resolving coding errors required significant time investment, but now, if you capture the error screen and paste it, you will receive accurate guidance on how to fix it. This is a very engaging experience, and time passes quickly. Many such changes are occurring.

The most significant problems are job reduction and the exacerbation of economic inequality. A small number of highly talented individuals are being scouted and receiving high compensation, while the majority of people are left wondering what to do. Furthermore, competition between nations is intensifying, and these changes are not unfolding smoothly but are manifesting as increased costs within the context of US-China competition.

The US has restricted the use of low-cost Chinese components, and China can no longer import components from the US. This contrasts sharply with the period from 1980 to 2008 when globalization reached its peak. During that time, capital and investment expanded globally, but since 2008, globalization has been in decline. The global economy experienced rapid growth for about 70 years from 1945, faltered briefly in the 1980s, and then grew again through globalization. However, since the 2008 financial crisis, the trend of globalization has reversed, and the intensification of US-China competition has increased global economic instability.

In such times, there are aspects where economic changes are being distorted by US-China competition. Furthermore, artificial intelligence is causing the problem of widening the gap between developed and developing countries. Countries previously referred to as 'developing countries' or the 'Third World' are now called the 'Global South,' indicating a shift in terminology. As the development and dissemination of AI technology are led by developed countries and China, the Global South is being marginalized, making the global AI gap a significant issue. According to Wallerstein's theory, a distinction between the world's core and periphery existed as early as the 1400s, but the gap between developed and developing countries was not substantial at that time.

The gap between countries began to widen significantly in the latter half of the Industrial Revolution. From the mid-1800s onwards, the gap between developed countries (shown in blue) and developing countries (shown in green) widened considerably, and this expanded further with rapid growth after World War II in 1945. Additionally, the IT revolution in the 1980s served as a catalyst for further widening the gap. The phenomenon of widening gaps occurred repeatedly with the emergence of new technologies, such as the automotive industry in the 1920s and the steel and electricity industries in the 1800s, as economic paradigms shifted.

This pattern of widening gaps with the emergence of new technologies, narrowing due to diffusion, and then widening again with new technologies has been repeated. The gap widened in the 1980s, and with the advancement of AI in the 2020s, this gap is expected to widen further. While inequality was once accepted as natural, the inequality we are experiencing today can cause serious problems for the entire system. A certain level of disparity can foster a spirit of challenge, but insurmountable gaps, like those between 'dirt spoons' and 'gold spoons,' are a serious issue. This problem threatens the prosperity and survival of the planet and can no longer be ignored.

How to respond to this issue, specifically how to mitigate the disparities brought about by technology and redistribute income, has become a major global policy challenge. Some argue that the 'algorithmic empire' will exacerbate disparities due to AI technology, while optimistic views suggest AI will provide opportunities for developing countries to solve traditional underdevelopment problems. Technologies like deep learning can be useful tools for solving health issues. Discussions are needed on how to realize such optimistic scenarios. In summary, AI is profoundly impacting and reshaping various domains, including military affairs, the economy, and relations between developed and developing countries.

The ripple effects of AI will be immense. You will spend your youth in an era where artificial intelligence is pervasive. You must be far more sensitive to AI than your professors and consider how to use AI as a tool to enhance yourselves. Hesitating with 'What is this?' could lead to missed opportunities. It is crucial to recognize the immense impact of AI and, even if you don't fully understand it, maintain an attitude of interest and willingness to learn.

The Development Process of the US-China Technological Competition

This attitude is essential. Currently, the United States and China are fiercely competing over AI, and this competition continues as of 2025. To understand how this competition has unfolded and how it will progress, we must examine its past trajectory. The issue of US-China technological competition has been prominent for about 10 years. Before that, there were no conflicts centered around technology. At that time, issues like trade deficits were primarily discussed.

In 2015, China announced 'Made in China 2025.' When I was pursuing my master's degree in the late 1980s and went abroad in 1991, I was interested in international political economy but hadn't settled on a specific topic. My master's thesis was on 'The Theory of American Hegemonic Decline,' which was a major topic in international politics in the 1980s. There were many discussions about America's decline.

There were discussions led by Paul Kennedy and others. I critically reviewed these discussions and argued that American hegemony would remain robust for decades, which has proven to be true. At that time, Japan, not China, was mentioned as the next hegemonic power. Ironically, China was not even mentioned back then. Japan was still considered a country with great potential.

Japan refers to the 1990s as its 'Lost Decade.' When I finished my undergraduate studies in 1987-1988 and graduated in 1989, there was a heated debate about the advent of the Asia-Pacific era and Japan's leadership in it. At that time, Japan had a massive trade surplus with the United States, primarily exporting semiconductors, automobiles, and electronic products. This led to technological issues, and the term 'Yellow Peril' emerged in the US, with efforts to block Japanese entry into the electronics and semiconductor markets. Nevertheless, the prevailing outlook was that Japan's growth could not be stopped.

In any case, when I was asked what I would study after graduation in that situation, no professor in the late 1980s predicted that China would emerge as an important player and advised me to study China. The collapse of the Soviet Union was also something no one predicted in the late 1980s, and everyone was caught off guard by its sudden downfall.

As a specific example, Chairman Ha Young-sun (then a professor) confessed that although he met with various scholars at Creighton in 1985-1986, no one anticipated the Soviet Union's collapse within four to five years. At that time, no one predicted China's rise; instead, discussions primarily focused on Japan, which was expected to decline. This illustrates how people's perceptions can misread trends and make inaccurate predictions. Reading these trends requires deep attention and effort. When did China begin to rise? Deng Xiaoping initiated China's growth through reform and opening up in the late 1970s, but it took 10 to 20 years for the effects to materialize. China was still a developing country. However, regional growth was occurring, and China's accession to the WTO in 2001 served as a catalyst. The WTO was established in 1995 during the Clinton administration, spearheaded by the United States.

China sought to join the WTO, and there was debate at the time about whether to allow its accession. The majority favored joining. The hypothesis was that as China's economy grew and it integrated into the liberal world economy, a middle class would emerge, becoming critical of the authoritarian regime and undergoing systemic change through democratization movements. Through this, China was expected to transform into a country with American-style democracy and human rights, playing a role as a major global power alongside the United States. What has become of that hypothesis now?

It is difficult to definitively say that the hypothesis was entirely wrong. We cannot know China's status 50 years from now. Clinton's decision to admit China to the WTO is subject to much criticism. Some analyses suggest that the US subprime mortgage crisis, cited as one of the causes of the 2008 financial crisis, was also influenced by policies favorable to Wall Street during the Clinton era. At that time, the Clinton administration achieved a budget surplus and trade surplus, leading economic growth. Clinton's goal was the 'Speed Economy'.

He was praised for reviving the US economy, which had suffered from fiscal and trade deficits during the Reagan administration, and for restoring America after the difficulties caused by increased defense spending during the Gulf War. However, in the context of the current competition with China, there are criticisms that the judgments made at the time were flawed. I recall that during the North Korean nuclear crisis in 1994, when the 'sea of fire' remark was made during nuclear negotiations, there were concerns that the US might launch a nuclear attack on Korea. Although the nuclear attack was averted due to President Kim Young-sam's strong protest, North Korea ultimately became a nuclear power. For these reasons, the Clinton administration has faced criticism. Regardless, after China joined the WTO in 2001, its economic growth rate exceeded 10%. It established itself as the manufacturing hub of the global economy and maintained high-speed growth for about a decade until the early 2010s, before President Xi Jinping took office. Around 2012-2013, limitations began to appear in this high-speed growth.

This high-speed growth was based on low wages. However, as countries like Vietnam and Indonesia, with lower wages than China, emerged, the perception grew within China that growth based on low wages was no longer feasible. Consequently, the need to establish an economy centered on technological innovation was raised, resulting in the announcement of 'Made in China 2025' in 2015. This document outlined the goal for China to transform from a low-wage country to a technology-driven nation within ten years.

President Xi Jinping set an ambitious goal to become a technology-driven nation through massive investment in the technology sector. At that time (2015), it was during the Obama administration. The Obama administration recognized this and expressed concern, but as it was the end of their term, they did not take specific actions. However, they prepared an executive order to maintain American leadership in the semiconductor sector, anticipating that Hillary Clinton would inherit it. But the situation changed with Trump's election victory in 2016. Although China began its push in 2015, the Obama administration viewed China as a 'stakeholder' and did not significantly restrain it. In contrast, the Trump administration began overtly confronting China immediately after taking office. Trump initially focused on trade deficits rather than technology.

Judging that the US trade deficit with China was unacceptable, he initiated investigations, particularly raising issues of intellectual property infringement, and launched an attack through trade. While 2017 was relatively calm, the trade war escalated in 2018-2019 with the imposition of tariffs. After negotiations and a period of stalemate in 2019, the outbreak of COVID-19 rendered the trade negotiations less significant. During the trade negotiations, it became apparent that China was rapidly catching up to the US in advanced technology sectors.

The perception within the Trump administration was that China was attempting a technological leap by stealing American technology and that this must be strongly prevented. Consequently, Huawei was identified as America's most formidable competitor and threat, and sanctions were imposed on all of Huawei's businesses. Sanctions began in 2018, but Huawei did not yield. It achieved success in both its telecommunications equipment and mobile phone businesses. In response, the US sought more sophisticated sanctions. It was determined that blocking only US equipment was insufficient, so the Bureau of Industry and Security (BIS) under the Department of Commerce applied the 'Foreign Direct Product Rule'.

This rule states that foreign companies using more than 25% of U.S. raw materials or equipment also fall under U.S. export controls. As a result, semiconductor equipment and chip manufacturing companies such as Samsung, Taiwan's TSMC, and the Netherlands' ASML began to be affected. While there was no significant impact in 2018, Huawei began to decline as transaction restrictions were strengthened in May 2020. At that time, the latest mobile phone chips, which were Huawei's main business, were manufactured by Samsung or TSMC, and these were advanced chips used not only in space weapons or artificial intelligence but also in the mobile phones you use.

This investigation was initiated. Initially, the issue of intellectual property infringement was approached as a trade issue, leading to trade sanctions such as the imposition of tariffs. While things were quiet in 2017, the trade dispute intensified in 2018 and 2019. When both sides were exhausted and reached negotiations at the end of 2019, the COVID-19 outbreak occurred, diminishing the significance of the trade negotiations.

It was highlighted that advanced technology is the area where China is rapidly catching up to the U.S. technologically. The Trump administration determined that China was attempting a technological leap by stealing U.S. advanced technology and sought to block this strongly. Consequently, the U.S. designated Huawei as its biggest competitor and a threatening company, initiating sanctions on all of Huawei's businesses starting in 2018. However, Huawei continued its business despite the sanctions.

Despite U.S. sanctions, Huawei continued to grow in both its telecommunications equipment and mobile phone businesses. In response, the U.S. sought new sanctions through the Bureau of Industry and Security (BIS) of the Department of Commerce. Determining that merely prohibiting the sale of U.S. equipment was insufficient, they decided to apply the 'Foreign Direct Product Rule (FDPR)'.

This rule is an exception that includes foreign companies using more than 25% of U.S. technology or equipment under U.S. export controls. Due to this regulation, semiconductor equipment and chip manufacturing companies such as Samsung, Taiwan's TSMC, and the Netherlands' ASML began to be affected. While there was no significant impact in 2018, Huawei began to decline rapidly as transaction restrictions were strengthened in May 2020. At that time, the semiconductor chips installed in Huawei's latest mobile phones were manufactured by Samsung or TSMC, and these were core technologies used not only in artificial intelligence and space weapons but also in mobile phones used by general consumers.

Mobile phones have an enormous impact. It feels as if brain functions don't work properly without a mobile phone. The latest chips are installed in mobile phones, and when Huawei could neither manufacture nor import them, it had to cease operations. It is now pursuing in-house production and releasing models like the Mate Pro again.

U.S. Strategy to Contain China's Technology and Reshape Supply Chains

During the Trump administration, Chinese companies' growth was curbed but then showed a trend of rising again. Even after President Biden took office, the containment of Chinese companies continued. When President Biden took office, many, including myself, expected him to improve relations with China differently from Trump, but he began to contain Chinese companies even more strongly than Trump.

The Biden administration systematically continued export controls on China. The Trump administration was focused on blocking China, but the Biden administration recognized the problem of why the U.S. could not produce the latest semiconductor chips domestically and had to import them from Taiwan or South Korea. This was perceived as a threat to U.S. security, and this perception was further strengthened by the shortage of automotive semiconductors during the COVID-19 pandemic.

The perception arose that certain logistics or components are critical to U.S. security and cannot be solely reliant on imports. The globalization trend, which began in the 1980s, pursued cost-efficiency above all else. If production could be cheaper overseas, there was no reason to produce domestically. Taking mask production as an example, the cost of domestic production in the U.S. was $10, while production in China was about 500 won, so naturally, it was produced in China. This was the approach followed by all countries.

South Korea also experienced a mask shortage at that time. Through these experiences, countries began to re-evaluate logistics and supply chains. The perception spread that critical items for security or the economy must be produced domestically. Accordingly, while maintaining containment of China, the U.S. developed legislation during the Biden administration to provide substantial subsidies and investments in the production of semiconductor and AI-related components to strengthen its domestic advanced manufacturing capabilities.

Third, as confirmed during the Trump administration, it is difficult for the U.S. alone to contain China. Therefore, the perception emerged that alliances with countries such as Japan, Taiwan, South Korea, the Netherlands, and the UK are necessary to contain China. Policies have been pursued centered around these three pillars: export controls on China, strengthening domestic manufacturing capabilities, and technological alliances. Even after the Trump administration's re-election, technological restrictions on China continue, but there is a shortage of companies capable of strengthening domestic advanced semiconductor manufacturing capabilities.

As the competitiveness of companies like Intel has waned, the U.S. has pressured TSMC and Samsung Electronics to establish factories in the U.S. The goal is to produce the latest semiconductor chips for U.S. companies to use. Taiwan is vulnerable to China's military threats, and South Korea is vulnerable to North Korea's threats. If anything happens to these countries, the semiconductor supply chain will be disrupted, causing significant chaos in the U.S. economy. Therefore, the U.S. needs to produce chips domestically to prepare for such situations, but since domestic production by U.S. companies is difficult, they are attempting to attract foreign companies.

A plan to provide subsidies to attract foreign companies has been pursued. If it costs 50,000 won to produce one chip in South Korea, it costs two to three times more in the U.S. due to high labor costs, environmental regulation costs, etc. Therefore, while TSMC and Samsung Electronics are hesitant to invest in the U.S., the U.S. government has sought to induce investment through subsidies. However, former President Trump questioned the provision of subsidies to foreign companies.

Former President Trump argued that tariffs should be imposed instead of subsidies to encourage foreign investment. If a 20% tariff were imposed on South Korean semiconductors, the price of a 50,000 won semiconductor would rise to 15,000 won. In this case, South Korean companies might consider it more advantageous to establish factories in the U.S. and produce them more cheaply. However, both TSMC and Samsung Electronics are in a difficult situation due to the uncertainty surrounding subsidy provisions. In terms of technological alliances, pressure is being applied to each allied nation.

Recently, pressure regarding tariffs and defense cost-sharing has been applied to allies, with the European Union (EU) and South Korea also facing such pressure. This is weakening alliance relationships. The U.S.'s technological containment of China, pursued through both the Trump and Biden administrations, has succeeded in curbing China's growth. China is experiencing difficulties in producing the latest technological products as it is unable to use U.S. products. While attempting domestic production, technological innovation does not occur in the short term, leading to a stalemate. In this situation, not only the U.S.'s strong sanctions but also the cooperation of its allies have played an important role. However, as relations with allies have cooled, the uncertainty of cooperation has increased, raising questions about the success of economic policies toward China.

China's AI Technology Development and Competition with the U.S.

Facing U.S. sanctions and technological supply restrictions from allies, China has focused on developing its own technology and made substantial investments. As a result, although not rapidly, achievements have begun to appear. In the past, the prevailing expectation was that China would find it difficult to catch up technologically, but this perception began to change earlier this year when an artificial intelligence model developed by a Chinese startup called DeepSeek showed performance similar to ChatGPT.

Earlier this year, it was revealed that an artificial intelligence model developed by a Chinese startup called DeepSeek is as efficient as ChatGPT. While it is known that 100,000 Nvidia chips are used in ChatGPT, the DeepSeek model demonstrated excellent performance with relatively fewer resources. This suggested the possibility of developing lightweight and cost-effective models, different from the conventional approach of massive capital investment. DeepSeek's success demonstrated the potential of China's AI revolution, and it is analyzed as the result of an innovative ecosystem beyond the achievement of a single company. Furthermore, although not on par with Nvidia's latest chips like H100 or H200, Chinese companies have succeeded in developing chips with similar performance by combining existing equipment.

While several Chinese AI companies such as Alibaba, Qwen, and DeepSeek are gaining attention, Huawei is establishing its own ecosystem by dominating chip manufacturing and the entire AI ecosystem. Although not on par with the U.S., it possesses competitive cost-effectiveness. During the Trump and Biden administrations, the U.S. was in a comfortable position, but the DeepSeek shock earlier this year made them recognize the rapid pace of China's technological development. This demonstrates the formidable competitiveness of China's AI technology.

Some argue that U.S. containment has actually stimulated China's technological innovation, leading to a counterproductive effect, but I do not agree. If there had been no containment, China would have already caught up technologically to a significant extent by 2015-2018. Thanks to the containment over the past 6-7 years, memory semiconductor companies like South Korea's SK Hynix and Samsung Electronics have contributed to slowing down China's technological pursuit to about 40-50%. This has bought time for Korean companies to maintain their competitiveness. Currently, the U.S. is ahead overall, but the rapid pace of China's technological catch-up cannot be overlooked.

China's AI innovation ecosystem, data, and algorithm capabilities are so strong that the U.S. cannot confidently guarantee its leadership. Examples of advancements in the AI field are emerging not only from DeepSeek but also from various other companies. I am analyzing this phenomenon by comparing it to the period in the late 1800s when the U.S. caught up to British manufacturing and achieved rapid economic growth. The economic conditions of that period of shifting hegemony offer important implications for the current U.S.-China hegemony competition.

From the late 1800s to the early 1900s, the U.S. achieved remarkable economic growth and became the center of the global economy. Britain began to decline, and the actual shift in hegemony occurred after World War II with the establishment of dollar hegemony. Hegemony fully transitioned after a period of approximately 70-80 years. While dollar hegemony remains strong, China has already surpassed the U.S. in manufacturing. By around 2050, China is projected to account for about 50% of global manufacturing, a level comparable to the peak of U.S. manufacturing (over 50%).

The U.S. economy currently appears to lack vitality. Since the 2008 financial crisis, a structure has become entrenched in the U.S. where much higher returns can be expected from the financial industry than from manufacturing. Consequently, companies tend to invest heavily in finance rather than manufacturing. Although the Trump and Biden administrations are striving to revitalize manufacturing, overcoming these structural problems seems difficult. I am skeptical about whether this trend can be reversed.

No matter how hard the U.S. tries, a revival of overall manufacturing, beyond a few specific sectors, seems unlikely. Manufacturing plays a crucial role in the development of a strong middle class and political systems. The period of democratization in developed countries coincides with the period of manufacturing development, and South Korea also showed a tendency for democracy to shrink with the decline of manufacturing. Manufacturing is a very important industry politically and economically, but in the U.S., its revival is already difficult. Nevertheless, they are trying to force a revival of manufacturing.

The U.S. is a country with underlying strength, so it may achieve some results, but the current situation is very difficult. This is especially true if former President Trump's policy direction is maintained. Currently, the vitality of the global economy lies with China, but China's economic vitality has also significantly declined since COVID-19. Authoritarian political systems can hinder innovation, and innovation is difficult in environments lacking free information flow and liberal culture.

China is already facing the problem of an aging population, which greatly affects its national competitiveness. The working-age population is decreasing, making it difficult to maintain the high growth rates of the past. In the past, one might have invested in China, but currently, due to the uncertainty of the U.S. economy, China's rapid aging, and concerns that an authoritarian political system may hinder market-friendly innovation, there is hesitation in investing in China.

Future Outlook of U.S.-China Competition and the Need for Cooperation

Otherwise, the outcome will depend on whether the U.S. makes more blunders or China makes more blunders. If one or two more presidents like Trump emerge, the U.S. will be doomed, and if the collective leadership system is restored due to the emergence of a Xi Jinping crisis, China may have a chance to recover. Otherwise, China's future is also uncertain. In this situation, the U.S. holds the technology, but China is catching up very quickly.

While it is difficult for China to completely replace U.S. technological dominance, it is likely to catch up by offering cost-effective models in specific application areas. This is becoming industrialized, and the severe fiscal deficit that emerged during the Trump administration is also providing an opening for China. To cover the U.S. fiscal deficit, treasury bonds are issued,

Interest must be paid on the issuance of treasury bonds, and more treasury bonds must be issued to repay this interest. Niall Ferguson, a renowned British economic historian, identified the clear point of decline for a hegemonic power as the moment when interest payments on national debt exceed defense spending. This was the case for Britain and the Netherlands. However, in the U.S., interest payments on national debt exceeded defense spending in 2024.

U.S. defense spending is approximately $700 billion, accounting for half of global defense spending. However, interest payments on national debt are even higher. This is due to the massive liquidity supplied through quantitative easing during the COVID-19 period. This was possible because the U.S. is the issuer of the reserve currency, the dollar, which can be printed, but South Korea cannot do so due to inflation and exchange rate issues.

With so much money being circulated, the situation is difficult, and as the fiscal deficit became too severe, the Trump administration abolished the U.S. Agency for International Development (USAid), an agency that supports third-world countries. It made the incomprehensible decision to abolish an organization that had been maintained for 70 years since World War II and transfer its functions to the State Department. This money is a budget used through organizations like the WTO to address health issues in the third world or operate international organizations.

With the disappearance of that budget, concerns are rising that a second COVID-19 pandemic could occur in Africa and other regions. The space of international politics is not empty. When one power withdraws, another power enters. China is stepping into that void, proposing, 'If you need money, use my money.' Third-world countries, though hesitant, are accepting China's proposals because they urgently need funds. This is leading to closer ties between the Global South and China, which in turn leads to a reduction in U.S. influence.

This poses a significant challenge to the long-term reduction of U.S. international influence. The discussion about AI is connected in this way. What will happen in the future? Some degree of bloc formation is expected. In areas like AI, there will be parts where the U.S. and China cannot cooperate, even at great cost, and these will inevitably become separated. A completely separated internet, or 'split-net,' may emerge. China already uses a significant portion of internet protocols.

However, China is in a precarious situation. If the U.S. controls the DNS through ICANN, the Chinese internet could be paralyzed. This is because the U.S. holds the authority to manage the root directory. While it is unlikely to go that far, it is naturally a source of anxiety for China. If a separated internet network is established, usage will become inconvenient and costs will increase. However, due to national security concerns, partial separation is inevitable. Complete separation is difficult, but it will proceed in a manner of partial separation and partial cooperation.

The competition in semiconductor chips is similar. Only 20-30% of the entire semiconductor chip market is competitive. The remaining 70% still uses US chips for China. This is because the cost of producing electronic products would be too high without using Chinese chips. In other words, we are living in a dual world where approximately 70% is shared in terms of electronic products, and 30% is separated. AI will be the same in the future. The US tried to strengthen the separation, but allowed the sale of H20 chips again when China presented the rare earth card. Although the H20 is a lower-spec chip, there are criticisms that it could be used as a pretext to access Chinese data.

China supplies 90% of the world's rare earth production. The US also has rare earths, but does not produce them due to the enormous costs and pollution issues associated with mining and refining. However, if costs increase, the US will inevitably have to start production. With the resale of H20 chips, criticisms have emerged that China has planted a backdoor. This implies an intention to access Chinese data.

NVIDIA claims there is no backdoor, but this logic is the same as when Huawei was attacked in the past. The argument was that if backdoors were present in Huawei equipment installed in US communication networks, secret information would be leaked. At that time, the US pressured South Korea's LG Uplus to replace Huawei equipment. The situation is now reversed. As partial decoupling progresses, a mixed pattern will emerge. China leads in basic research and data acquisition, but lags in AI chips and computing power. While the Chinese government's regulations and interference, coupled with a weak concept of privacy, facilitate data utilization, they may hinder overall innovation.

Recent monitoring by the Harvard Belfer Center indicates confidence in the US's lead in AI models and other areas. The current US-China competition differs from the past. In the past, the US and the Soviet Union were not economically interdependent and were separated with a focus solely on the military domain. However, the current US-China competition in semiconductor and AI technology is a representative example of civil-military fusion technology.

This technology is utilized for both commercial and military purposes, and the companies and nations developing it are intricately intertwined. NVIDIA is an American company, but its founder is Taiwanese, and it desires sales in the Chinese market. When Trump took office, Tim Cook and Elon Musk visited the White House, but NVIDIA CEO Jensen Huang was doing business in China. This illustrates the divergence between corporate interests and national interests. This competition is expected to continue fiercely for about the next 50 years, and it is difficult to gauge the overall trend at present. A clearer outlook may be possible in 20 to 30 years.

When Germany challenged British hegemony in the early 1900s, German technological prowess surpassed Britain's, but it did not become the hegemonic power. Only after becoming the hegemonic power in 1985 did the US become the most innovative nation. In other words, technological superiority is not a prerequisite for becoming a hegemonic power. The US-China competition must be viewed from this perspective. More important than predicting the winner in 30 years are the trends in climate change and AI technology development. These are civilizational issues, and humanity could face mutual destruction if all nations do not cooperate. The winner of the US-China competition will ultimately depend on cooperation for the sustained prosperity of humankind.

If we proceed competitively, we are bound to self-destruct. Artificial intelligence technology will come to dominate us. Demis Hassabis, CEO of DeepMind, which developed AlphaGo, predicted that artificial general intelligence (AGI) surpassing human intelligence will become a reality within five years. The pace of AI development is extremely rapid, so we must advance the technology in a direction that solves problems without posing a threat to humanity. However, the US and China are developing technology by focusing on defeating each other rather than on human preservation, which is extremely dangerous.

Cooperation is necessary. In the past, the US and the Soviet Union cooperated on the development of the polio vaccine and space docking, even during the Cold War. The US and China must also cooperate, and many countries desire this. As a middle power, we must play a role in mediating this cooperation.

The UN recognizes the seriousness of AI and is promoting the establishment of an international organization. While discussions related to climate change are underway at the UN, similar to the climate change convention, cooperation is not proceeding smoothly. If a similar situation occurs with AI, it could lead to catastrophe. This may be the time when a world government is needed.

South Korea's Role and the Construction of a Middle Power AI Model

In international politics, there is a joke that a world government might be formed if aliens invade. Climate crisis or AI threats are comparable to alien invasions. Even if not a full world government, a system is needed to control competition so that it does not lead to catastrophe. South Korea has recently been focusing on developing Korean-style AI models, such as AI Korea and Korean AI models.

Technology experts say that a Korean-style AI model is not an impossible endeavor. South Korea has a small market of 50 million people, but has a foundation with Naver Line and others. We must implement a new AI model that contributes to democratic values, community priorities, and bridging the gap, rather than American or Chinese models. This is an area that neither the US nor China has achieved. It is impossible alone, so middle powers must unite. We must unite with countries that share similar ideas to form a third force and create an AI model that contributes to human prosperity and climate change solutions.

Rather than unconditionally following the United States or China, it is important to create and contribute a model that is acceptable even if it lags slightly behind. I am proud to see all of you here today, studying despite this hot summer weather. The lectures will continue in the future.

We hope to make this a valuable time that can greatly contribute to your growth. Thank you for today.

Bae Young-ja, Professor of Political Science and International Relations at Konkuk University.