[New Year Special Commentary Series] ① The Competition in Semiconductor and AI Technology and Changes in World Politics in 2024

1. Technology and World Politics

Semiconductor and artificial intelligence (AI) technologies are becoming major topics on the world political stage. Semiconductor export restrictions are a core component of the US strategy toward China, and as competition among nations over cutting-edge technologies such as generative AI intensifies, the world is paying attention to the military applications of AI. While technology has been a major driver of change in world politics since the modern era, it has typically been perceived as a background factor or an external variable, with technology itself rarely becoming the protagonist of world politics. Since the 1990s, with the rapid digital transformation based on the spread of the internet and smartphones, the role of technology in driving social change has become more visible, and the scope and depth of technology's influence have expanded. Amidst these changes, various concepts have emerged to broaden the understanding of the dynamic relationship between technology and social change, such as 'technology-society ensemble,' 'human-nonhuman actor-network,' 'co-production, co-evolution, and mutual constitution of technology and society,' and 'techno-politics.' The unfolding US-China tech competition brings technology to the center of the world political stage, demonstrating that the scope of societies co-evolving with technology is expanding to the level of world politics. A certain level of knowledge about technology is required to properly understand world politics, and at the same time, it is undeniable that the content, direction, and values of technological development are closely related to the dynamic unfolding of world politics. Technology is reshaping the frameworks and content within which security, prosperity, and values are pursued, transcending the domains of military security, economy, norms, and culture on the world political stage. Nations are faced with the challenge of diagnosing how the landscape of world politics is changing due to technological advancements and, consequently, how to protect their security and sustain prosperity, and what values and identities to preserve and newly shape.

Within the realm of world politics, attention has focused on AI and semiconductors as foundational technologies with particularly significant ripple effects among various technologies. Alex Karp, CEO of Palantir, a big data analytics platform company, was the first IT CEO to visit Kyiv amidst the conflict in Ukraine. Palantir was an unsung hero in the operation "Neptune Spear" to track down Osama bin Laden, contributing to locating his hideout. The CEO's visit to Ukraine was a sign that big data and various AI weapons would play a crucial role in the war. Indeed, Palantir has played a decisive role in enabling Ukrainian forces to sustain their fight against Russian forces with inferior numbers and weaponry by accurately pinpointing Russian troop locations through the integrated analysis of information collected from commercial satellites, thermal imagers, social media, reconnaissance drones, and spies. The effectiveness of Starlink satellite internet service and the mobile e-government application Diia is also widely known.

As the era of high growth over the past 30 years has ended and global economic recession persists due to the pandemic and geopolitical conflicts, developed countries are experiencing problems such as declining productivity, persistent inflation, aging populations, and shrinking labor forces. The economic utilization of AI, along with clean energy, is generating expectations as a field that can bring the global economy back to the path of growth. A McKinsey report predicted that the advent of generative AI could automate about 70% of office workers' tasks, creating economic value exceeding $4 trillion annually, equivalent to the GDP of Germany.[1]AI technological advancements are leading to the realistic prospect of AI personal assistants (agents) that can proactively utilize diverse data to solve problems, distinguishing themselves from passive digital bots. Intense innovation competition is underway regarding whether the hardware implementation of AI assistants will take the form of apps or new devices such as pins, glasses, necklaces, or holograms, and how various data will be stored, analyzed, and utilized. Currently, the economic utilization of AI can be likened to the first batter hitting the ball in the bottom of the first inning in baseball. To expand the AI economy, answers must be found to issues such as developing low-cost, high-performance chips, designing AI architectures that can reliably provide information without hallucination or confabulation, protecting personal information, and determining the extent of autonomy to be granted to AI assistants. As this game, which has just begun, unfolds towards the bottom of the ninth inning, various countries and companies are competing to hit singles or home runs, and actively participating in creating rules that will lead the game in their favor.

In 2024, approximately 40 countries worldwide will hold general or presidential elections, starting with the Taiwanese presidential election in January and culminating in the US presidential election in November. The influence of AI in the production and distribution of information is immense. In particular, the flood of easily created and disseminated fake news and election interference through cyber operations have become commonplace. While fake news and election interference have existed for a long time, their combination with AI has led to the emergence of plausible falsehoods and even the perception of domestic elections being conducted internationally. As citizens consume information selected by AI algorithms, their political views tend to become more extreme rather than open and inclusive, leading to a growing consensus that democracy, based on common sense, tolerance, and diversity, is in crisis.

Professor Geoffrey Hinton, diagnosing the current state of AI development, has warned that humanity is entering a new phase in the history of intelligence development and that AI will soon control and surpass humans.[2] Even if AI does not reach the point of controlling humanity, it is evident that we have entered an era where AI is already exerting influence across military security, economy, and identity. The argument that we must manage the inherent risks of AI while enjoying its convenience and efficiency is gaining traction, and discussions on AI norms and global AI governance have begun. The European Union (EU) has already enacted an AI Act, the US Biden administration has issued an executive order to manage AI risks, and G7 international guiding principles and a code of conduct for AI have been established. Various proposals are on the table, such as a framework similar to the Nuclear Non-Proliferation Treaty (NPT) or the International Atomic Energy Agency (IAEA) for managing nuclear weapons or nuclear power, or a UN-affiliated AI organization. In 2024, the competitive development of Large Multi-modal AI, which combines text, image, and voice, will accelerate changes in global military security and cultural spheres, while the necessity and discussion of managing the direction and risks of AI development will also intensify.

2. Retrospect and Outlook

Looking back at 2023 from the perspective of technology and world politics, the most significant event was the full-scale adoption of generative AI, which intensified competition surrounding AI on the world political stage while simultaneously spurring active discussions on AI-related norms and governance. Machine learning, based on data-driven learning and pattern recognition, and deep learning, which produces results through organic and hierarchical learning of feature extraction and classification based on artificial neural networks, operated at the level of classification or prediction based on given data. In contrast, generative AI, by actively seeking and learning data to solve problems and presenting results, exhibits a self-thinking capability, representing a further evolution towards Artificial General Intelligence (AGI). ChatGPT, released in late November 2022, gained attention by acquiring over 100 million users in just one to two months. According to OpenAI, the developer of ChatGPT, as of the end of 2023, ChatGPT has 100 million weekly active users, and 92% of Fortune 500 companies use ChatGPT. While OpenAI leads the race, Google released its AI chatbot Bard in February of this year and recently introduced the large multi-modal model Gemini. Furthermore, over 50 AI organizations, including Meta and IBM, have formed an AI alliance and are closely pursuing ChatGPT by offering open-source generative AI. China has also seen its AI companies, including Baidu, which released Ernie Bot as a rival to ChatGPT, along with Alibaba, ByteDance, Tencent, and SenseTime, launch more than 12 generative AI models.

Currently, the United States holds the lead in generative AI. Generative AI operates based on hardware such as Graphics Processing Units (GPUs), cloud computing, and supercomputers, and the US holds an irreplaceable advantage in each of these areas. NVIDIA dominates the global GPU market, and Amazon, Microsoft, and Google account for over 65% of the global cloud market. The US accounts for 45.8% of the world's supercomputing power, nearly half, followed by Japan at 12.5% and China at 8.9%. Despite the US's absolute hardware advantage, attention is drawn to China's AI capabilities due to its vast data resources, accumulation of AI fundamental research and patents, government support, and the existence of various pathways in AI development that could allow China to implement differentiated AI models based on imitation. The role of the Chinese government in AI development is dual-edged. The Chinese government is both the largest consumer and supporter of AI technology. On the other hand, the interim regulations for the management of the generative AI industry, enacted in China, stipulate that AI services must align with China's socialist values and do not permit generative AI to provide answers that contradict the government's opinions, thus hindering AI development.

The United States, recognizing the need to maintain the maximum possible gap with China in cutting-edge technologies, has continuously expanded export controls on dual-use technologies with military and civilian applications. AI semiconductors, in particular, have been designated as a core focus of export controls to China, encompassing not only the prohibition of chip exports but also regulations on equipment necessary for chip manufacturing. Since the EU clarified its China strategy in early 2023 as de-risking rather than decoupling (economic separation) from China, senior US officials have successively stated that the US also pursues a de-risking strategy, not decoupling. Following visits by US business leaders, the Director of the Central Intelligence Agency (CIA), the Assistant Secretary of State for East Asian and Pacific Affairs, and the Secretaries of State, Treasury, and Commerce to China starting in May 2023, a US-China summit was held in September. Various factors are discussed as reasons for the resumption of communication between the two countries. The interdependence of the two economies is deeper than expected, and both countries require cooperation with each other for economic recovery. As US companies' dissatisfaction with export controls on China accumulated, visits by figures like Elon Musk and Jensen Huang to China and criticisms of US regulations on China began to emerge. Some US think tanks raised the issue of reassessing China, and the need to adjust US strategy toward China before the presidential election was also discussed. While some expressed expectations that the US-China conflict might somewhat ease following the visits by US business leaders and officials and the US-China summit, there were no signs of easing export controls on semiconductors and AI; instead, the scope of export controls on China has expanded and become more detailed.

In late 2022, the US government expanded its control targets by shifting from existing export control measures targeting specific companies to a list-based approach, including DRAM below 18 nanometers (nm), NAND flash above 128 layers, and logic chips below 14nm. In August 2023, the US government issued an executive order restricting investments by US private equity and venture capital firms in three areas in China: advanced semiconductors, AI, and quantum computing. The targets were specifically AI designed for military use, software for semiconductor design automation, and quantum cryptography that could compromise military communications. Despite opposition from the US semiconductor industry associations and companies, the US government announced further supplementary measures to expand export controls on China in November 2023. This was due to assessments that China's attempts to circumvent existing controls had limited the effectiveness of curbing the enhancement of China's semiconductor industry competitiveness and AI research capabilities. For example, Chinese AI companies were found to be using US cloud services or establishing semiconductor manufacturing bases outside surveillance networks. Furthermore, the scope of regulation was expanded by explicitly including lithography equipment using light sources with wavelengths of 193nm or longer (DUV) under export controls, whereas previously only equipment using light sources with wavelengths below 193nm (EUV) was controlled. This measure particularly strengthened regulations on advanced semiconductors related to AI. Despite debates about the effectiveness of export controls on China, particularly regarding reduced sales and R&D investment by US companies, and skepticism about their sustainability, US export controls on Chinese semiconductors have continued, been supplemented, and strengthened.

The Department of Commerce, which has primarily regulated advanced semiconductor chips, is now expanding its scope to focus on and show interest in the rise of China in the mature semiconductor sector, known as legacy chips. In fact, it announced plans to conduct a comprehensive survey in January 2024 on how US companies are sourcing mature semiconductors. The US perceives that if a similar situation unfolds in the mature semiconductor sector as seen in past cases where Chinese companies expanded market share based on price competitiveness in steel or solar power to become market dominators, this could also pose a security threat. It is very difficult for the US to prevent and control the consolidation of China's position in the mature semiconductor market. While more specific discussions will likely follow the survey results, if the US imposes sanctions on China's mature semiconductor supply, such as anti-dumping measures or safeguards, it is anticipated that trade conflicts between the two countries will further intensify.

In addition to export controls, the United States has begun providing support through the CHIPS Act to strengthen its domestic advanced semiconductor manufacturing capabilities. In March 2023, the Department of Commerce announced detailed guardrail regulations that restrict the expansion of domestic production facilities by companies receiving domestic subsidies and limit technology cooperation with companies in 'countries of concern.' Furthermore, it has been strengthening cooperation with various countries to enhance domestic semiconductor manufacturing capabilities and expand export controls. Japanese and Dutch semiconductor equipment companies began adding items to the list of export-controlled goods to China in the latter half of 2023. The US is actively pursuing semiconductor manufacturing and packaging cooperation with Asian countries such as India, Vietnam, and Malaysia.

Semiconductors, AI, and quantum computing are crucial means for realizing the 'China Dream.' In response to the US's intensified export controls, China stated, "They are weaponizing trade and technology issues," and urged, "We call for an immediate halt to these wrongdoings." China also declared, "China will take all necessary measures to resolutely protect the legitimate rights of Chinese companies." However, China's options were limited, and its response has largely followed two main paths. First, China has also begun to respond with import/export controls and regulations. In May 2023, China deemed US semiconductor company Micron's products a threat to national security and requested major state-owned enterprises, telecommunications operators, and cloud service providers to halt purchases, leading Chinese companies to cease purchasing Micron products. Starting in August, China included gallium, germanium, and their compounds, used in semiconductors and displays, in its list of export-controlled items. Second, China is strengthening various support measures for technological self-reliance. Following US export controls, China has created specific technology lists and is focusing support on these areas, moving towards the goal of self-reliance in technology and industrial ecosystems. In 2023, the 'Central Science and Technology Commission' was established under the Chinese Communist Party to lead policy in the science and technology sector for self-reliance and self-strengthening. Xi Jinping emphasized at a meeting of the National People's Congress local delegation that "whether we can fully build a modern socialist power as planned depends on the self-reliance and self-strengthening of science and technology," reflecting the will of the Party Central Committee to directly lead efforts to achieve scientific and technological self-reliance. China is preparing its third semiconductor fund worth 300 billion yuan, surpassing the 140 billion yuan and 200 billion yuan funds established in 2014 and 2019, respectively, and this fund is reportedly intended to support semiconductor manufacturing equipment. Facing difficulties in advanced semiconductor sectors, China is focusing on fostering legacy semiconductors, where demand is exploding due to the growth of electric vehicles and the Internet of Things, and advanced packaging, as well as achieving self-sufficiency in equipment and software. Although challenging, attention is drawn to how China will respond if the US begins to scrutinize legacy semiconductors in 2024, following its scrutiny of advanced semiconductors, given China's established market dominance in certain areas.

In 2023, Huawei's release of the Mate 60 Pro, a premium smartphone equipped with its own 7-nanometer processor chip, garnered significant attention. While China currently faces difficulties in mass-producing advanced semiconductor chips at a reasonable cost, the manufacturing of advanced semiconductor chips is a critical objective that China cannot afford to abandon. This event demonstrated the earnest efforts of Chinese companies despite strong US scrutiny. China's goals in the semiconductor sector are to ensure a stable supply of cutting-edge semiconductor chips, continuously upgrade its position in the value chain towards high-value manufacturing and equipment, and achieve domestic manufacturing of cutting-edge semiconductors by catching up with Korean and Taiwanese companies. While achieving these goals is not easy, it is not impossible, and China's persistent efforts are evident. The key question is how quickly China can achieve these objectives.

One of the most significant variables in forecasting technological and world political changes in 2024 is the US presidential election. The keywords of the Biden administration's economic security policy are supply chains and cutting-edge technologies, pursued through the so-called 3P policy: promotion of advanced manufacturing capabilities, protection through export controls, and partnership via technology alliances. If a Republican administration takes office, export controls are likely to continue, but significant changes are expected in the aspects of advanced manufacturing support and technology alliances. For the US to counter China and maintain its lead in cutting-edge technologies, the 3P policy must function as a cohesive set; if even one pillar collapses, the outcome is likely to favor China. Even if the 3P policy continues, challenges such as the effectiveness of subsidy distribution, growing fatigue or backlash against export controls, and differing national interests among allies will emerge, necessitating the search for solutions on how to sustain these policies in the long term. For China, the question remains whether its support policies and efforts to enhance technological innovation capabilities and achieve technological self-reliance will yield tangible results. Amidst the strengthening of Xi Jinping's and the Communist Party's power, doubts are raised about whether this can coexist with the promotion of market vitality and a socio-cultural environment conducive to technological innovation. China is currently at a historical juncture, facing the challenge of finding an appropriate balance between these two aspects, embarking on a path unprecedented in history.

In 2024, competition and conflict, rather than cooperation, will overwhelmingly characterize the technology sector between the US and China, with competition in semiconductor and AI technologies intensifying, and conflicts becoming visible in the realms of norms and governance. The historian Paul Kennedy, in his book "The Rise and Fall of the Great Powers" published 35 years ago,The Rise and Fall of the Great Powersargued for hegemonic wars and transitions caused by the overextension of hegemonic powers due to shifts in production and economic power distribution resulting from unequal growth rates among nations in world politics. In an article published in 2023, he identified the United States, China, Russia, the EU, Japan, and India as the six countries that could be considered great powers in the coming decades, predicting that while conflicts among these nations will continue, there will be no major power shifts in the near future.[3] He notes that China is the first country in 150 years to surpass US GDP, and while this has significant geopolitical implications, he expresses reservations about China's rise, pointing to its internal issues such as underdeveloped rural areas, high youth unemployment, heavy reliance on food and energy imports, real estate bubbles, and environmental pollution. Regarding the US, he points out that despite its overwhelming military power, superior technological capabilities, advanced education system, and the strength of the dollar, shifts in the relative distribution of economic power and power transitions are occurring in world politics, making it crucial for the US to manage its relative decline. He suggests that the US must make difficult decisions about where to scale back its interests and commitments that extend to every corner of the globe. From the perspective of technology and world politics, Paul Kennedy's argument can be interpreted as meaning that the US must focus on maintaining its technological superiority while simultaneously reducing and redefining its geopolitical space related to national interests.

He further argues that even within a stable order, there will be signs of transition from one era to another, but at present, we cannot precisely determine when a different era will begin. Just as it is difficult to pinpoint the exact turning point from the post-World War I order to the pre-World War II order, whether it was Japan's invasion of Manchuria in 1931, the failure of disarmament talks in 1932, or Hitler's rise to power in Germany in 1933. In 2024, the US-led order is expected to be maintained, while simultaneously showing signs of weakening. From a technological perspective, the US-led trend is likely to continue for the time being, but competition and conflict with China are expected to intensify within this framework.

3. South Korea's Technology Diplomacy Strategy

In response to the rise of economic and technological security concerns due to US-China tech competition, nations are currently developing various policies. While the specific content of these strategies varies slightly by country, they broadly include enhancing cutting-edge technological capabilities, strengthening supply chain security, and reinforcing technology alliances, with supply chains and cutting-edge technologies as key themes. South Korea is also responding by actively supporting cutting-edge technologies, particularly semiconductors, establishing monitoring and response systems to ensure supply chain security, and strengthening cooperation in cutting-edge technologies with the US.

South Korea and the United States signed a Science and Technology Cooperation Agreement in 1992 and have since sought cooperation agendas through joint science and technology committee meetings. At the individual technology level, the ROK-US Agreement on Cooperation in the Peaceful Uses of Nuclear Energy has been in place, facilitating ongoing cooperation. With the intensification of US-China tech conflict, a consensus has formed that low-level, intermittent cooperation needs to evolve into more strategic and sustained collaboration. Currently, cooperation with the US is being strengthened through various channels, particularly in cutting-edge technologies, expanding the security-centric ROK-US alliance into the technological domain. Samsung's investment in US semiconductor foundries is underway, agreements such as the Quantum Information Science and Technology Cooperation and the Artemis Accords have been signed, and the Next Generation Critical and Emerging Technologies Dialogue has been newly established to advance cooperation in areas such as semiconductors, AI, quantum computing, and biotechnology. It was announced that cooperation will be enhanced between public and private research institutions, including the establishment of the US National Semiconductor Technology Center (NSTC) and the Korean Advanced Semiconductor Technology Center (ASTC) in the semiconductor sector, and opportunities for joint research support between the Ministry of Science and ICT and the US National Science Foundation will be expanded. In the AI field, the US will cooperate with South Korea on the Mini AI Virtual Summit, the AI Global Forum, and the Responsible Artificial Intelligence in the Military domain Summit (REAIM), which South Korea is scheduled to host next year, and will form an AI working group to discuss international standards, joint research, and policy interoperability.

Strengthening cooperation with the United States in cutting-edge technologies is not an option but a necessity. Given the US's overwhelming influence in semiconductor and AI technologies, enhancing South Korea's innovation capabilities in these fields is impossible without cooperation with US companies. While centering cooperation on the US is natural, finding mutually beneficial opportunities amidst the US's overwhelming advantage is challenging. To ensure that cooperation is substantive rather than merely formal, we must proactively seek and propose cooperation agendas. Furthermore, we must recognize that the interests of both countries do not always align perfectly and accurately identify what South Korea aims to achieve through cooperation and areas requiring response. For instance, long-term consideration is needed regarding which sectors Korean semiconductor companies can maintain their competitiveness when the US becomes the center of semiconductor manufacturing. While US chips and cloud services are indispensable for South Korea in the AI sector, deep consideration is urgently needed for a Korean-style AI development model, exploring how the Korean AI industry can evolve under the overwhelming influence of US platform companies. US cutting-edge technology policies exert significant influence beyond its borders, impacting South Korea immensely. Therefore, precise monitoring is essential, along with upgrading information and negotiation capabilities and establishing a public-private cooperation system to protect the interests of Korean companies on a case-by-case basis.

Strengthening cooperation with the United States has created difficulties in relations with China in the field of cutting-edge technologies. As cutting-edge technologies are closely related to military technologies, which are at the core of US-China strategic competition, the trend of US-China decoupling is unlikely to ease. While strengthening cooperation in cutting-edge technologies with the US, efforts are needed to maintain cooperation with China in non-cutting-edge technologies or basic science, and it is important to convey this message cautiously. Both the US and China are making efforts to maintain various forms of communication rather than extreme confrontation. South Korea should also continue its diplomatic engagement with China by leveraging networks of China experts, pro-China politicians, and business figures through a division of roles.

To prevent the strengthening of ROK-US cooperation in cutting-edge technologies from leading to weakened cooperation with other countries, multilateral diplomacy in the field of cutting-edge technologies must be enhanced. Currently, cooperation among the US, Taiwan, Japan, and the EU is strengthening in the semiconductor sector. As companies from each country make cross-investments, a US-Japan-Taiwan lineup is forming. While centering our cooperation on the US is appropriate, the establishment of a more proactive and simultaneous multilateral cooperation system is necessary to complement this. We must actively seek and develop cooperation agendas with Japan, as well as Taiwan, the EU, India, and other Indo-Pacific countries.

In the era of US-China tech competition, the core of South Korea's technology diplomacy lies in strengthening our cutting-edge technological capabilities and establishing and supporting the diplomatic framework for this. Despite cutting-edge technologies becoming the most important diplomatic assets, a significant gap still exists between technology and diplomacy in South Korea. The science and technology sector perceives technology diplomacy within the existing framework of international science and technology cooperation, while the diplomatic sector is unfamiliar with technology, leading to confusion in technology diplomacy. For international science and technology cooperation to evolve into more strategic science and technology diplomacy, the content of science and technology and the framework of diplomacy must mutually penetrate and converge. Leadership and governance are needed to guide the integration of science and technology with diplomacy, centered on enhancing South Korea's global political standing and vision. ■

[1] McKinsey. 2023. “The economic potential of generative AI: The next productivity frontier.” June 14. https://www.mckinsey.com/capabilities/mckinsey-digital/our-insights/the-economic-potential-of-generative-ai-the-next-productivity-frontier (Accessed: January 2, 2024.)

[2] Lambert, Harry. 2023. “Is AI a danger to humanity or our salvation?” The New Statesman. June 21. https://www.newstatesman.com/long-reads/2023/06/men-made-future-godfathers-ai-geoffrey-hinton-yann-lecun-yoshua-bengio-artificial-intelligence (Accessed: January 2, 2024.)

[3] Kennedy, Paul. 2023. “The Rise and Fall of the Great Powers redux.” The New Statesman. September 20. https://www.newstatesman.com/ideas/2023/09/rise-and-fall-of-great-powers-redux-paul-kennedy (Accessed: January 2, 2024.)

■ Bae Young-ja_Professor, Department of Political Science and International Relations, Konkuk University.

■ Editor: Park Han-soo_EAI Research Fellow

Contact: 02 2277 1683 (ext. 204) | hspark@eai.or.kr