An aerial view of a semiconductor manufacturing plant. [Image: Fensterblick. / Wikimedia Commons (CC BY-SA 3.0)]

The United States Looks to Form Semiconductor Alliance with Indo-Pacific Partners


In March 2022, the United States proposed a semiconductor industry alliance with Japan, South Korea, and Taiwan. Each country plays a major role in the global semiconductor supply chain, as companies such as Taiwan Semiconductor Manufacturing Company, Intel, Samsung, and Mitsubishi hail from these countries. Collectively, these four countries make up roughly 90% of the global market share.

The alliance’s primary purpose would be to limit China’s dominance over the semiconductor industry. Since 2017, China’s semiconductor industry has grown steadily at 2.8% annually, and its market size is currently $87.7 billion. This development is a source of concern for Washington, and tensions have been exacerbated by the COVID-19 pandemic and US-China trade war. In a move to deny Chinese companies resources and equipment, the United States started in 2021 to impose export restrictions on Chinese semiconductor manufacturers, severely limiting their capabilities to produce chips. The proposed alliance is another part of the United States’ strategy to consolidate influence over the semiconductor industry and supply chain.

However, the future of the multilateral alliance is uncertain. South Korea is hesitant to join, mainly due to concerns about jeopardizing its operations in China. South Korean companies such as Samsung and SK Hynix heavily rely on the Chinese market and run facilities in the mainland. Currently, Samsung operates a memory chip plant in Xi’an, while SK Hynix manufactures chips in Wuxi. If South Korea joins the alliance, then it faces the risk of Chinese retaliation. It is unsurprising South Korea cautiously approaches matters involving Washington and Beijing. In 2017, South Korea’s decision to accept Terminal High Altitude Area Defense (THAAD) batteries from the United States brought intense backlash from China, specifically through trade and tourism restrictions. This event serves as a stark reminder for South Korea of how explicitly aligning itself with the United States carries potential costs.

Nonetheless, President Biden continues to build stronger ties through bilateral discussions. In his most recent visit to South Korea and Japan, semiconductors were a key talking point for President Biden’s meeting with his counterparts. Japan’s Prime Minister Fumio Kishida pledged to increase cooperation in semiconductor development through discussions and coordination with other partners. President Biden’s meeting with South Korea’s President Yoon Suk-yeol took place in a Samsung Electronics chip factory. In 2021, Taiwan’s TSMC broke ground and plans to spend $12 billion to build a chip manufacturing factory in Arizona expected to be operational by 2024. While it is unclear if a greater semiconductor alliance will come together, the proposal shows how important the issue is for the United States and its partners.

Jae Chang is a participant of the Young Professionals Program at the East-West Center in Washington. He is a recent graduate of Cornell University, where he studied Government and China & Asia-Pacific Studies.