US urges South Korea not to fill China’s loopholes if Beijing bans Micron chips

The White House has asked South Korea to urge its chipmakers not to fill any market gaps in China if Beijing bans Idaho-based Micron from selling chips, as it tries to rally allies to counter Chinese economic coercion.

The United States made the request as President Yoon Suk Yeol prepares to travel to Washington for a state visit on Monday, according to four people familiar with talks between the White House and the presidential office in Seoul.

China this month launched a national security review of Micron, one of the three dominant players in the global Dram memory chip market, along with South Korea’s Samsung Electronics and SK Hynix.

It is unclear whether the Cyberspace Administration of China will take any punitive action after its investigation. But the stakes are high for Micron, as mainland China and Hong Kong generated 25% of its $30.8 billion in revenue last year.

U.S. officials and business executives believe the CAC probe is Beijing’s retaliation for President Joe Biden’s tough moves to help stop China from obtaining or producing advanced semiconductors. .

The Micron case has emerged as a litmus test of whether Beijing is willing to take coercive economic action against a major US company for the first time.

The United States has asked Seoul to encourage Samsung Electronics and SK Hynix to refrain from increasing sales in China if Micron is banned from sales following the investigation, according to people familiar with the matter.

The White House request comes at a sensitive time with Yoon’s arrival in Washington on Monday. While the United States has worked with allies to counter China in the Indo-Pacific security zone, this is the first known time that it has asked an ally to enlist its companies to play a role. .

The South Korean Embassy in Washington and Samsung did not respond to requests for comment. SK Hynix said it had not received any request from the South Korean government. Micron declined to comment.

The White House did not comment on specifics, but said the Biden and Yoon administrations had made “historic progress” in deepening cooperation on national and economic security issues, including efforts to protect “security technologies.” point”.

“This includes efforts to coordinate investments in the semiconductor industry, secure critical technologies, and combat economic coercion,” the US National Security Council said. “We expect the upcoming state visit to further strengthen cooperation on all these fronts.”

It is unclear how Seoul reacted. US and South Korean officials are finalizing the visit. They discuss many issues, including how the United States can give Seoul more assurance on “extended deterrence” – the US nuclear umbrella – as North Korea escalates tensions on the peninsula.

The Micron-related request puts Yoon in a complicated position. He took office last year on a platform widely seen as more hawkish on China than that of his leftist predecessor, Moon Jae-in. Illustrating his position, he provoked an angry reaction from Beijing last week by accusing China of trying to change the status quo on Taiwan “by force”.

But his administration has also chafed at US efforts to rally allies behind its economic security agenda, amid fears that the long-term competitiveness of Samsung and SK Hynix could be undermined by US export controls.

While Samsung and SK Hynix won’t appreciate efforts to reduce their business in China, the United States could have some leverage. When the United States unveiled sweeping chip-related export controls in China last October, it granted South Korean companies with chip manufacturing facilities in China waivers to allow them to export from the country. These waivers are up for renewal later this year. The Commerce Department said it had no update on the situation.

Memory chipmakers are already under pressure from an industry glut that in the first quarter of this year caused a 25% drop in the price of Dram chips, which are used in everything from televisions to phones.

Last week, Treasury Secretary Janet Yellen said Washington was concerned about “a recent increase in enforcement actions targeting American companies.”

A person familiar with the situation said the request to Seoul reflected that the Biden team was “motivated to ensure that China cannot use Micron as leverage to influence or effect US policy.”

He said the United States could help thwart Chinese efforts at economic coercion by showing Beijing that it would work with allies and partners to undermine any such move against American or allied companies.

China has used economic coercion against Taiwan and other countries, including Lithuania and Australia. But he refrained from taking major action against the United States even as Biden unveiled strict controls on chip exports and imposed sanctions on other Chinese companies.

A person who recently met with Chinese officials in Beijing said she was losing patience with what she saw as US efforts to crack down on Chinese companies, suggesting she was considering retaliation.

The US request to Seoul underscores how the chips are at the heart of some of the deepest rifts between Washington and Beijing.

In December, the United States put Yangtze Memory Technologies Co, a memory chip producer that the White House called China’s “national champion,” on its “Entity List.” That means companies aren’t allowed to export American technology to Micron’s fledgling rival without a hard-to-obtain license.

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