The Future International Politics of the Global Semiconductor Value Chain: Kyushu National Museum

Kim Sung-ah · University of Seoul

Introduction

Today, 'semiconductors' are a hot topic, with new articles and reports flooding in daily. Semiconductors are the core of the digital age, forming the foundation for not only electronic devices like smartphones and laptops, but also for advanced industries such as passenger aircraft, autonomous vehicles, corporate production lines, medical devices, weapon systems, and artificial intelligence (AI). Semiconductor technology cannot be monopolized by any single country; it relies on a global value chain (GVC) where each stage—design, manufacturing, packaging, and assembly—is specialized by country. The semiconductor shortage that occurred during the COVID-19 pandemic, in particular, served as an opportunity to recognize the importance of the global semiconductor value chain.

Furthermore, 'semiconductors' are the foundation of the Fourth Industrial Revolution and are at the center of the US-China hegemonic competition. As former Google CEO Eric Schmidt stated, "The decisive factor in the competition between the United States and China is 'innovation,' and the 'ability for continuous innovation' is the source of 'national power.'" (Foreign Affairs, 2023.2.28) In this regard, 'innovation' in science and technology serves as a crucial nutrient for economic and military power, which are necessary conditions for a hegemonic power, thus connecting it to the direction of the global hegemonic order.

Therefore, to predict the international order of 2050, this paper will examine cases of 'strengthening innovation capabilities' and 'sanctions' through export controls by major countries such as the United States, China, Taiwan, South Korea, and Japan that constitute the current global semiconductor value chain, and then forecast the future Asia-Pacific order through the lens of the global semiconductor value chain.

The Past and Present of the Global Semiconductor Value Chain

History of the Semiconductor Industry

Over the past 30 years, the semiconductor industry has continuously improved its performance and productivity through technological innovation. Beginning with personal computers in the 1990s, it evolved to web-based online services and the development of smartphones in the 2000s. According to the Semiconductor Industry Association (2023, 16), it is estimated that global GDP was directly impacted by semiconductor innovation by approximately $3 trillion over the 20 years from 1995 to 2015, with indirect impacts reaching about $11 trillion. Furthermore, semiconductor technology innovation is expected to drive various innovations such as artificial intelligence, autonomous vehicles, and the Internet of Things over the next decade. Examining the history of the semiconductor industry, after William Shockley discovered the transistor at Bell Labs in 1948, Jack S. Kilby of Texas Instruments and Robert Noyce of Fairchild developed the integrated circuit in 1958, opening the door to today's semiconductor industry. While the semiconductor market boomed with the contributions of figures like Gordon Moore, founder of Intel and famous for 'Moore's Law' in the 1960s, Japan emerged as a semiconductor manufacturing powerhouse in the late 1970s through bold investments in manufacturing driven by a state-led economic growth model. Consequently, between 1978 and 1986, the US market share plummeted from 70% to 20%, while Japan's share of DRAM memory semiconductors surged from less than 30% to approximately 75% (Irwin, 1996, 7).

The reason why semiconductors developed in the United States could succeed in Japan is attributed to economic theories such as Ricardo's theory of comparative advantage and the state-led economic development model, which is an East Asian economic development model (Lee, 2023, 12). The United States felt a strong sense of crisis due to Japan's rise in the semiconductor industry, leading to trade friction between the two countries. The semiconductor friction between Japan and the United States was exacerbated by the differing perceptions of semiconductors between the two nations. The US viewed the decline in the competitiveness of its domestic semiconductor chips as a threat to national security, while Japan saw it as an extension of existing trade disputes concerning industrial products like textiles and automobiles.

(Akihiro Okada, The Japan News, 2023.8.5)

In the 1980s, Japan was the adversary of the United States. While Japan struggled with anti-dumping tariffs and market access restrictions under agreements, the US was able to recover its semiconductor market share through technological development in system semiconductors (Ibid.). Furthermore, unlike Taiwan's TSMC, which focused on contract manufacturing (foundry), Japan lost its leadership in semiconductor production by focusing on final products (downstream industries) led by Integrated Device Manufacturers (IDMs) (Lee, 2023). Following the Plaza Accord in 1985, which adjusted exchange rates amidst trade disputes, Japan, feeling the pressure, entered into the First and Second Semiconductor Agreements in 1986-1991 and 1991-1996, respectively, to resolve these issues. Subsequently, Japan's share, which accounted for over 50% of global semiconductor production in the late 1980s, fell to approximately 9% in 2022. Amidst the conflict between the US and Japan, South Korea seized an opportunity to enter the memory semiconductor sector.

Semiconductor Industry Structure and Current Status

The semiconductor industry structure is broadly divided into design, fabrication, and assembly & test (packaging). First, semiconductor design is related to the upstream industry that provides the raw materials for semiconductors. This includes design assets, process and measurement equipment, and material suppliers. There are fabless companies like Qualcomm and Nvidia that only handle design and distribution, and Integrated Device Manufacturers (IDMs) like Samsung and Intel that handle both design and manufacturing. For design, the underlying architecture relies on licenses from IP (Intellectual Property) companies such as ARM in the UK. According to a CSIS report on the semiconductor supply chain, the United States leads in semiconductor design, with US companies accounting for over 40% of the global design market share, including revenue from EDA, semiconductor IP, and design services (Thadani and Allen, 2023, 6). Next, semiconductor chip manufacturing is handled by manufacturing companies (foundries) like TSMC in Taiwan and Samsung in South Korea, which use lithography equipment from ASML in the Netherlands to etch semiconductor designs. The semiconductor manufacturing process begins with silicon extraction, followed by refining the silicon and manufacturing wafers approximately 300mm in diameter. The semiconductor manufacturing process, represented by 'silicon wafers',

(Choi Gye-young, 2022, 136).

As of 2021, Taiwan holds the largest market share with a quarter of the market (US 13%, Japan 13%, Taiwan 25.4%, South Korea 18.3%, China 14.8%, Others 15%). Notably, the Indo-Pacific region possesses the majority of the world's semiconductor wafer facilities. Out of 1,470 identified wafer manufacturing facilities globally, 1,215 are located in the Indo-Pacific region (Thadani and Allen, 2023, 17). Building fabrication plants (fabs) for wafer manufacturing and production is extremely costly, leading to a concentration in a few countries that made significant initial capital investments. Therefore, the Indo-Pacific region, home to foundry companies like Taiwan's TSMC which specializes in advanced semiconductor production for fabless companies,

has become geopolitically important. Once wafer processing is completed in the fab, the individual chips are cut, separated, tested, and assembled into circuit boards; this packaging process is called ATP (Assembly, Test, Packaging). ATP is a labor-intensive process concentrated in Taiwan, China, and Southeast Asian countries. The downstream industry of semiconductors includes mobile devices, computers, automobiles, home appliances, and the defense industry, which are assembled into final products.

<Figure 1> Semiconductor Industry Structure

Source: McKinsey and Company (2022) and BCG and SIA (2021) OECD (2023/05)

Reprinted from VULNERABILITIES IN THE SEMICONDUCTOR SUPPLY CHAIN

Semiconductor types include memory semiconductors, such as DRAM for short-term memory and NAND flash for long-term memory. System semiconductors (logic, CPU, optical, analog, discrete semiconductors, etc.), which constitute the majority of the semiconductor market, perform information processing such as computation and inference and are led by fabless companies due to their capability for high-mix, low-volume production. Currently, the United States leads in the system semiconductor sector. Representative examples include Intel in the computer and server CPU market, Broadcom in the telecommunications semiconductor market, Qualcomm in wireless communication and mobile processors, and Nvidia in the GPU market for accelerating AI data processing (Choi Gye-young, 2022). Furthermore, Big Tech companies like Apple, Microsoft, and Alphabet are also increasingly pursuing vertical integration, directly participating in the chip hardware sector to optimize design and achieve flexibility in customized production and supply chain management for their products.

In the memory semiconductor sector, Micron of the United States forms a dominant trio with Samsung Electronics and SK Hynix. The current concern for the US is foundry, related to semiconductor manufacturing, as only TSMC in Taiwan and Samsung in South Korea can produce semiconductors below 10 nanometers (Ibid.). However, the US semiconductor industry currently accounts for 39% of the total value of the global semiconductor supply chain, and the contribution of US allies and regions such as Japan, Europe (Netherlands, UK, Germany), Taiwan, and South Korea reaches 53% (Khan et al., 2021, 3). It is clear that the United States is not only the issuer of the global reserve currency but also a pivotal semiconductor nation capable of leading the US-led global semiconductor value chain.

306 <Figure 2> Global Market Share of the Semiconductor Industry

Source: SIA (2023) Factbook (World Semiconductor Trade Statistics (WSTS), Omdia, and SIA estimates

The Prelude to the Semiconductor War

Following the end of the Cold War, a US-centric unipolar order persisted. This order began to be challenged in 2012 with China's economic rise, which advocated for a 'new type of major power relations.' Factors such as the US's economic weakness due to sluggish exports to China, the rise of cyber threats (e.g., Russia's DDoS attack on Estonia in 2007), and the resource war between the US and China from 2010-2014, mediated by resources like rare earths, contributed to the deterioration of US-China relations. Ultimately, the US intensified its pressure on China, enacting measures in 2018 under the National Defense Authorization Act to restrict transactions with Huawei, a Chinese company.

The COVID-19 pandemic in 2019 sent shockwaves through the global semiconductor supply chain. The imbalance between semiconductor demand and supply led to economic ripple effects, including price increases. An analysis of over 200 manufacturing sectors in the US revealed that industries dependent on semiconductors experienced a 6% higher price increase compared to other manufacturing sectors, and the semiconductor shortage caused inflation, such as the rise in US automobile prices (Klyman, The Wall Street Journal, 2022.6.12). Furthermore, according to an OECD report analyzing the vulnerabilities in the semiconductor industry's supply chain (Haramboure et al., 2023), the semiconductor industry is structurally characterized by high fixed production costs and high concentration. From 1995 to 2018, the center of gravity for semiconductor production shifted from Japan and the US to Asian manufacturing countries like China, South Korea, and Taiwan. The report analyzes that if semiconductor production were to halt in any single country, it could impact numerous downstream industries and economies.

China accounts for the majority of the world's germanium and gallium ore extraction and is a crucial supplier of essential semiconductor materials. It is also the largest semiconductor market, representing 36% of US companies' sales (SIA, 2023, 15). Each country constituting this complex global semiconductor value chain is staking its future on both strengthening semiconductor industry development through 'sanctions' via export controls and enhancing 'innovation capabilities'.

308

Semiconductor Industry Strategies of Major Countries

1. United States

The Biden administration is pursuing a two-track strategy of 'strengthening innovation capabilities' and 'sanctions' against China to reshape the US-centric semiconductor supply chain. First, the US government enacted the CHIPS and Science Act (CHIPS, Creating Helpful Incentives to Produce Semiconductors and Science Act) in August 2022, which aims to foster a semiconductor ecosystem for reorganizing the US-centric semiconductor supply chain. The CHIPS and Science Act allocates approximately $280 billion to support the semiconductor industry through subsidies, tax credits (a 25% investment tax credit for facilities for semiconductor and related equipment manufacturing), and research and development and workforce training to enhance technological competitiveness. The US Department of Commerce's master plan for semiconductor promotion includes programs for semiconductor financing, the establishment and operation of the National Semiconductor Technology Center (NSTC), advanced packaging manufacturing programs, and semiconductor industry workforce development.

Recently, the US Department of Commerce announced the final guardrail provisions under the CHIPS and Science Act (September 22, '23). These guardrail provisions prohibit companies receiving subsidies or tax credits from expanding production facilities in countries of concern, such as China, for the next 10 years. This aims to prevent the incentives provided by the US from being used to develop the industries of competing nations and to prevent the leakage of core technologies within the US-centric semiconductor ecosystem. Subsequently, strengthened export control measures against China have included not only advanced semiconductors but also production equipment in the list of prohibited exports.

The Biden administration, like the Trump administration, operates from a perception of competition with China. However, it differs from the Trump administration's 'America First' approach in its emphasis on democratic values and alliances. Strategic cooperation through initiatives such as the Indo-Pacific Economic Framework (IPEF) launched in May 2022, the Quadrilateral Security Dialogue (Quad), and the US-EU Trade and Technology Council (TTC), as well as concrete cooperation efforts through reshoring and near-shoring to strengthen supply chains, and the formation of the Chip 4 Alliance (US, South Korea, Taiwan, Japan) and friend-shoring with key geopolitical allies and partner countries.

2. China

Since Xi Jinping's first term, China has recognized the importance of securing and self-relying on core technologies and announced 'Made in China 2025.' 'Made in China 2025' aims to foster leading companies in 10 advanced manufacturing sectors, including semiconductors, by 2025. Furthermore, China has revealed its ambition to lead in manufacturing standards through the 'China Standard 2035' initiative. Additionally, at the Fifth Plenary Session of the 19th Central Committee of the Communist Party of China in October 2020, strategic science and technology fields, goals, and measures were announced for the first time and reflected in the 14th Five-Year Plan. The 14th Five-Year Plan aims to promote supply chain internalization by increasing R&D investment by over 7% annually to achieve technological self-reliance. Concurrently, the Chinese government announced 'Semiconductor Industry Promotion Measures' and released an implementation plan in 2021. This plan aims to achieve 70% self-sufficiency in semiconductors, which are crucial for the AI era, by 2025 (Baek Seo-in et al., 2022). In 2023, China announced the 'Overall Plan for Building a Digital China,' outlining its future strategy for a digital China, and established a Data Administration to specifically implement these plans, thereby pursuing internal technological self-reliance policies. Furthermore, the Chinese Ministry of Commerce and the Ministry of Science and Technology announced 'Measures for the Establishment of Foreign R&D in China to Expand Foreign Investment Attraction' in January 2023 to foster international cooperation.

310 externally, China continues its efforts to revitalize trade within the Asia-Pacific region and strengthen its economic influence within the region through existing policies such as the Belt and Road Initiative (BRI), the Regional Comprehensive Economic Partnership (RCEP) which came into effect in 2022, and the Shanghai Cooperation Organization (SCO).

Externally, China continues its efforts to vitalize trade within the Asia-Pacific region and strengthen its economic influence through existing initiatives such as the Belt and Road Initiative (BRI), the Regional Comprehensive Economic Partnership (RCEP) which came into effect in 2022, and the Shanghai Cooperation Organization (SCO).

3. Japan

In May 2022, the Japanese government enacted the Economic Security Promotion Act (Act on the Promotion of Ensuring Security by Comprehensively Promoting Security Measures in the Economic Field) and is pursuing a strategy that emphasizes 'strategic autonomy' and 'strategic indispensability' through securing advanced technologies such as semiconductors and supply chain management, and expanding R&D investment. Furthermore, the Ministry of Economy, Trade and Industry formulated the 'Semiconductor and Digital Industry Strategy' in June 2021 and revised it in May 2023. The revised strategy aims to increase Japan's semiconductor production revenue and ensure a stable domestic supply of Japanese semiconductors.

Externally, to revive Japan's semiconductor industry, the US-Japan Industrial Partnership was established in May 2022, leading to an agreement on 'Basic Principles on Semiconductor Cooperation.' At the US-Japan summit held in the same year, a joint task force (TF) was launched to implement these basic principles. In July 2022, at the US-Japan Economic Policy Consultative Committee meeting, both countries agreed to pursue joint research and development (R&D). As a result of this agreement, it was decided to establish a government-supported R&D center (LSTC, Leading-Edge Semiconductor Technology Center), modeled after the US National Semiconductor Technology Center (NSTC). Japan has formed a consortium of Japanese companies called Rapidus in collaboration with US and European research institutions. Rapidus, with support from the government R&D center (LSTC), aims to design and produce next-generation 2-nanometer (nm) chips starting in 2027. Additionally, Micron of the US established manufacturing facilities in Japan after acquiring the bankrupt Japanese DRAM manufacturer Elpida Memory in 2012, and the Japanese government is supporting the expansion of Micron's factory in Hiroshima to produce new high-capacity, low-power 1-beta DRAM, the highest density DRAM produced to date. (Shivakumar

312 el al., 2023) Furthermore, TSMC of Taiwan is encouraging the establishment of a joint venture with Sony and Denso, an automotive parts manufacturer, and is considering plans for a second and third TSMC fab construction in addition to the wafer fab currently being built in Kumamoto Prefecture, introducing advanced micro-fabrication processes. The attraction of these foreign companies has been aided by active investment, including subsidies from the Japanese government. This approach is noteworthy as it aligns with the current US perception that Japan cannot regain leadership in the chip sector without international cooperation, such as partnerships with foreign entities, moving away from the self-sufficiency pursued by Japan until the 1990s (Ibid.).

4. South Korea

In August 2022, 'semiconductors' were designated as a national advanced strategic technology under the 'Act on Fostering National Advanced Strategic Industries,' and benefits such as tax credits for the semiconductor sector are provided through laws like the Restriction of Special Taxation Act. Furthermore, in March 2023, the South Korean government promulgated the 'K-Semiconductor Act,' a special semiconductor law that includes provisions to increase the basic tax credit rate for semiconductor facility investments by amending the existing Restriction of Special Taxation Act.

In March 2023, through initiatives such as the 'National Advanced Industry Promotion Strategy,' South Korea plans to create an advanced system semiconductor cluster worth approximately 300 trillion won, stimulate semiconductor investment, develop leading technologies, and secure talent. To maintain its overwhelming lead in the memory sector, R&D efforts are being expanded, and a public-private partnership is being formed to launch a dedicated semiconductor fund to foster an ecosystem for investment in the system semiconductor sector. Externally, following its participation in China-led RCEP ('Jan '22), South Korea joined the US-led IPEF ('May '22). It is also participating in the US-led CHIP4 Alliance (US, South Korea, Japan, Taiwan).

5. Taiwan

Taiwan, home to TSMC, the world's leading foundry company, supplies about 60% of global foundry capacity and 92% of the world's most advanced chips. Under the previous Kuomintang government, Taiwan maintained close cooperation with China. However, since the Democratic Progressive Party (DPP) government, led by Tsai Ing-wen, who is pro-US and anti-China, took power in 2016, Taiwan has implemented policies to maintain TSMC's leading-edge strategy under the so-called 'Silicon Shield' theory.

Lai Ching-te, who was recently elected as the 16th president and is known for his pro-US and independent stance, has also pledged to provide more active support for the semiconductor industry and is expected to continue the semiconductor-led growth strategy.

"Our semiconductor industry is particularly important. Through the 'Silicon Shield,'

we can protect ourselves and other countries from the aggressive

attempts of authoritarian regimes to disrupt the global supply chain. We

314 will strengthen our role in securing global supply chains through the New Regional Advanced Manufacturing Hub Initiative, thereby solidifying our position in the global supply chain."

supply chain security, and thereby solidify our position in the global supply chain."

(Tsai Ing-wen, Foreign

Affairs, October 2021)

In 2021, Taiwan announced the 'Support Measures to Maintain Taiwan's Semiconductor Manufacturing Advantage' at a meeting of the Executive Yuan. The government is continuing its efforts, including supporting the localization of materials and equipment with the goal of reaching $5 trillion in semiconductor production value by 2030, and providing approximately $27.5 billion in facility investment centered around TSMC in 2021. In particular, in 2023, Taiwan passed the 'Amendment to the Statute for Industrial Innovation,' referred to as the 'Taiwanese Semiconductor Act.' This amendment primarily offers tax credits of 25% and 5% of investment costs for investments in semiconductor research and development and advanced production process facilities, respectively. Furthermore, the Taiwanese government is striving to strengthen technological competitiveness through R&D by promoting the 'Next-Generation Ultra-Fine (Angstrom) Semiconductor Plan' since 2020, aiming for the localization of semiconductor equipment, self-sufficiency in basic materials, the development of next-generation semiconductors, and the cultivation of talent in advanced fields. Recently, Taiwan has been diversifying its production bases by constructing manufacturing plants in Japan and the United States, rather than solely in Taiwan or China where existing semiconductor plants are operated.

The Future of the Global Semiconductor Value Chain

315 7. The Future of the Global Semiconductor Value ChainInternational Politics_Kyushu National Museum of History and Culture

The US-China semiconductor war can be divided into two aspects: strengthening 'semiconductor innovation capabilities' for the reorganization of semiconductor supply chains centered around each country that constitutes the global semiconductor value chain, and 'sanctions' through export control measures. First, 'semiconductor innovation capabilities' can be examined from the perspective of technological innovation. According to Modelski and Thompson's (1996) Long Cycle Theory of Leadership, countries that lead innovation in the 'Leading Sector' have risen to become hegemonic powers in world politics. Therefore, to compare innovation at the national level for the leading sector, innovation capabilities are evaluated based on the input and output factors of the innovation system. Input factors include R&D investment and human resources, while output factors include indicators such as technological patents and SCI papers (Bae, 2017). Some argue that China has high potential for scientific and technological innovation, given that it ranks first globally in indicators such as research personnel, scientific publications, and patents (Allison et al., 2021). Therefore, to compare innovation capabilities at the national level for the leading sector, China's and the US's innovation capabilities are evaluated using input factors such as R&D investment and human resources, and output factors such as technological patents and SCI papers (Ibid.). Some argue that China has high potential for scientific and technological innovation, given that it ranks first globally in indicators such as research personnel, scientific publications, and patents (Allison et al., 2021). Furthermore, some suggest that a power transition from the US to China could occur if China concentrates its capabilities for innovation (Rapkin and Thompson, 2003, 333).

316 some argue that a power transition from the US to China could occur if China concentrates its capabilities for innovation (Rapkin and Thompson, 2003, 333).

Next, Jeffrey Ding (J, Ding, 2023, 4) distinguishes between 'Innovation Power' and 'Diffusion Power' when evaluating the scientific and technological capabilities of the US and China. 'Diffusion Power' refers to the process by which the effects of R&D are commercialized through industry-academia-research linkages and then spread to businesses. This means that new technologies developed from fundamental research are commercialized and then applied in the production processes of various industries, enabling mass production. For example, in the 19th century, the US, despite having less innovative power than Europe, was able to secure a sustained economic advantage through its commercialized technological capabilities (Ibid.). In contrast, the Soviet Union during the Cold War surpassed the US in indicators related to 'Innovation Power,' such as R&D expenditure and personnel, but failed to drive successful economic development due to flaws in its state-led, closed economic system that hindered the expansion to commercialization stages. Therefore, Jeffrey Ding analyzed China's case based on the Global Innovation Index and the Global Competitiveness Index, confirming a 'Gap' between 'Innovation Power' and 'Diffusion Power.' According to Ding (2023, 17), while the gap between China's 'Innovation Power' and that of the US is gradually narrowing, a significant gap still exists in the area of digital transformation for 'Diffusion Power.' Therefore, an evaluation of innovation capabilities to measure a nation's scientific and technological strength must consider not only 'Innovation Power' but also 'Diffusion Power.'

In his proposal on technology transfer policies toward China, James Lewis, Director of the Strategic Technologies Program at CSIS, assesses Huawei as a representative case that grew into a global company through the Chinese government's financial support and intelligence activities (Lewis, 2023, 5). In this context, the current US-China hegemony competition can be seen as a testbed between a competitive system under a liberal international order that allows open innovation to the private sector, and a state-led innovation system under an authoritarian regime. Lewis also emphasizes the need for a 'de-risking' strategy to reduce China's role in the global semiconductor value chain and limit its ability to profit from stolen technology, i.e., technology transfer to China (Lewis, 2023, 9). This is directly related to 'sanctions.'

Starting in 2023, the US began using the term 'de-risking' to describe its policy toward China. De-risking means managing risks associated with China, employing strategies such as diversification and selective decoupling. The bilateral trade relationship between the US and China is enormous, reaching $690 billion in 2022. Therefore, 'decoupling' between the US and China goes against the economic interests of both countries and is practically limited (Engelke and Weinstein, 2023). Alex Capri (2023) of the Hinrich Foundation explains that 'decoupling is when economic relations are completely separated and new partnerships are built, while de-risking focuses on mitigating risks in economic relations with specific countries, representing a more nuanced and gradual approach.' This implies that, unlike 'decoupling,' 'de-risking'

318 implies that transactions and investments continue after the risks have been removed. De-risking began to be discussed at the G7 Summit held in Hiroshima in 2023. This stemmed from the opposition to 'decoupling' with China expressed by European leaders, including German Chancellor Olaf Scholz. US National Security Advisor Jake Sullivan also emphasized in a speech at the Brookings Institution that 'what we seek is de-risking and diversification, not decoupling from China.'

However, despite proclaiming 'de-risking,' the US implemented comprehensive export controls on semiconductors to China on October 7, 2022, and on October 17, 2023, the Bureau of Industry and Security (BIS) of the US Department of Commerce announced more strengthened export controls by expanding the scope of technology categories and regions to prevent circumvention (DOC, 2023). Export controls are regulations and laws implemented by governments to restrict and monitor the export of specific goods, technologies, and services from one country to another, with the aim of protecting national and international security by preventing the proliferation of weapons of mass destruction. The Wassenaar Arrangement, signed by the US and its allies in 1996 after the Cold War, plays a constitutional and functional role in member states' export controls (Allen and Benson, 2023, 16-18). The purpose of US export controls on China is to limit China's semiconductor production from exceeding certain critical thresholds. Current semiconductor-related export controls target logic chips produced using process nodes of 16 nanometers (nm) or below, and memory chips (DRAM) of 18nm nodes or below, and NAND flash memory chips. Under the revised regulations, equipment that is not node-specific can only be exported to factories producing only older chip models. Regarding current export controls, Japan and the Netherlands have adopted additional controls, and allies are participating in these controls as a tool of foreign policy, as evidenced by the G7 Hiroshima Leaders' Joint Statement, the EU's Economic Security Strategy, and Germany's new China strategy (Ibid.).

Companies participating in 'sanctions' such as US export controls may lose access to the Chinese market. ASML CEO Peter Wennink stated that his company has 'sacrificed' for export controls, while US companies have benefited (MIT Technology Review, 2023). In the case of South Korea, companies are inevitably affected because they produce memory chip semiconductors in factories located in China. Furthermore, due to these sanctions, they are in a position where they must obtain validated end-user (VEU) approval for exceptions to US regulations. Regarding the effectiveness of these 'sanctions,' the US Belfer Center report (Klyman, 2022) questions their impact, stating that 'economic sanctions aimed at reducing US semiconductor production for China have exacerbated semiconductor shortages, slowing US economic growth and causing inflation.' Conversely, some argue that since US export controls on China are just beginning, if allies, including not only the US, Japan, South Korea, and Taiwan, but also EU member states such as the Netherlands and Germany, actively participate in the sanctions, then their effects will become apparent (Allen, 2023). Additionally, some experts believe that China's advanced technological capabilities should not be underestimated, and that China

320 will build an advanced semiconductor industry by circumventing US sanctions (Chiang, CNBC, 2023).

In response, China perceives 'de-risking' as a disguised form of 'decoupling.' China's Global Times (Globaltimes, 2023) has criticized de-risking as merely 'wordplay for decoupling,' and argues that de-risking itself, under the guise of de-Sinicization or de-globalization, can be a risk to the global economy. Based on this perception, China is retaliating against US 'sanctions' with various measures, including export bans on key raw materials.

'De-risking' and 'decoupling' are similar in that they both pose a 'threat' to China. Therefore, CSIS suggests that de-risking could unintentionally lead to decoupling (Emily Benson and Gloria Sicillia, 2023). Furthermore, World Trade Organization (WTO) Director-General Ngozi Okonjo-Iweala stated the need for 're-globalization through interdependence without excess, supported by diverse global markets and resilience' (Foreign Aff., 2023). To reduce China's risk in the global semiconductor value chain, various discussions are underway, including diversifying production bases and cooperating with Global South countries.

Conclusion

321 7. The Future of the Global Semiconductor Value ChainInternational Politics_Kyushu National Museum of History and Culture

During the Cold War, the US pursued a 'Containment' strategy against the Soviet Union. After the Cold War, it implemented an 'Engagement' strategy to integrate China into the US-led liberal democratic order. This engagement strategy ultimately proved to be 'illusory,' becoming the fundamental cause of the inefficiency in US policy toward China (Orion, 2020), and leading to China's economic rise. Through the US-China trade war under the Trump administration, the US sought to implement 'de-coupling' with China. However, decoupling with China, which has emerged as the world's second-largest economy since joining the WTO, has proven to be practically difficult. Therefore, the Biden administration, recognizing China as both a competitor and a partner, has been pursuing a 'de-risking' strategy focused on risk management since 2023. How will the two-pronged strategy of 'strengthening innovation capabilities' and 'sanctions' within the interdependent 'global semiconductor value chain' affect us? As South Korea, whose top export item is semiconductors, is bound to be more significantly impacted in terms of 'sensitivity' and 'vulnerability' than other countries, a long-term blueprint is needed, rather than a reactive, ad-hoc strategy.

We hope that South Korea can play a pivotal role in the Asia-Pacific order of 2050, which will be re-globalized around the global semiconductor value chain.

322

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