Core Tech Cooperation
The key focus of the economic collaboration announced at Camp David between South Korea, the U.S., and Japan is the mitigation of “China Risk.” This cooperative effort is aimed at countering China’s growing influence in high-tech industries by jointly tackling supply chain disruptions and technological theft.
According to the Ministry of Trade, Industry, and Energy on Aug. 20, the leaders of the three nations have announced plans for economic cooperation in three domains: supply chains, technology, and finance. Of particular interest is an alliance in the supply chain sector.
South Korea, the U.S., and Japan have decided to explore connecting their individual Early Warning Systems (EWS) for supply chains. It’s the first time multiple countries have considered introducing such an interconnected system. An EWS is a management framework designed to preemptively respond by detecting potential supply chain crises. The three nations will share information early on to prevent negative impacts on the supply chain if external disruptions lead to shortages in semiconductors or batteries.
In the semiconductor sector, each country will play a pivotal role based on their strengths. Industry insiders suggest a classification where South Korea focuses on manufacturing and supply, the US emphasizes foundational technology, and Japan specializes in materials, parts, and equipment. With the solidification of this semiconductor supply network, the influence of Korean enterprises is also expected to grow. By complementing each other’s shortcomings, the trio can both reinforce their position and contain China, reaping dual benefits.
However, concerns arise if China intensifies its opposition or if the U.S.-China tech rivalry becomes more protracted. While the immediate impact on South Korea’s semiconductor industry is predicted to be minimal, backlash from China may be unavoidable.
The three nations also hold high expectations for their combined efforts against China’s advances in electrification, especially in the battery domain. There have been ongoing calls for strengthened cooperation between South Korea and Japan’s battery industries. Park Tae-sung, executive vice chairman of the Korea Battery Industry Association, recently stated that given the similar positions of battery companies in both countries, “both associations need to jointly assist, from raw material procurement to production regulations in the U.S. and Europe.”
Japan pioneered lithium-ion batteries and commercialized hybrid vehicles (HEV). However, they’ve lagged in the transition to pure electric vehicles (EV), causing their battery industry to stagnate. As a result, companies like Toyota and Honda have pursued the U.S. market, partnering with Korean firms like LG Energy Solution.
An industry insider mentioned that “collaboration with Japan is the best-case scenario for our industry, which is constantly competing with China for market leadership.”
The three countries also designated artificial intelligence, space, and quantum computing as “Critical and Emerging Technologies,” agreeing to collaborate on research, standardization, and various other fronts. South Korea joining the trilateral tech powerhouse is significant, as it is establishing a solid foundation for proactive responses in the global tech rivalry.
A noteworthy outcome is the “Joint Development Project for Emerging Key Technologies,” with leading research institutes from all three countries participating. In the U.S., it’s the national laboratories under the National Nuclear Security Administration (NNSA). Japan has government-funded research institutes, and South Korea will involve research institutes under the Ministry of Science and ICT. The research fund will be set at US$6 million. They also plan to support the adoption of international standards for developed technologies and build a trilateral cooperative system for technology protection.
In previous events, South Korea and the U.S. have emphasized strengthening their “Space Alliance.” The joint statement on “Space Exploration and Science Cooperation” released by the two countries focuses on expanding South Korea’s participation in the U.S.-led international lunar landing project “Artemis Program” and collaboration on deep-space communication and satellite navigation systems.
Furthermore, last month, South Korea’s Ministry of Science and ICT hosted the “AI Week 20203” event in collaboration with Google, emphasizing the strengthening of AI research, development, and talent cultivation. Currently, there’s no distinct collaboration between South Korea and Japan in this domain. However, at a meeting on Aug. 19, both countries agreed to expand their foundation for high-tech cooperation, including AI, and announced future dialogues at an operational level.
Additionally, the three nations, through this summit, have also decided to establish a regular “Trilateral Finance Ministers’ Meeting” every year to prevent technology theft and stabilize financial markets. South Korea and Japan resumed their currency swap agreement in June after an 8-year hiatus, aiming to restore financial stability cooperation. This trilateral summit expands and evolves these bilateral financial stability efforts into a trilateral dimension.
The collaboration in the financial sector is expected to have significant stabilizing effects on the macroeconomy. The newly established trilateral Finance Ministers’ Meeting could discuss matters such as the South Korea-U.S. currency swap agreement, potentially alleviating the strong dollar trend that has been pressuring the South Korean economy recently. Additionally, the government announced that the Korea Eximbank has signed a Memorandum of Understanding (MOU) with the U.S. International Development Finance Corporation (DFC) and Japan International Cooperation Bank (JBIC) to expand infrastructure investment cooperation. Through this MOU, South Korea now has the opportunity to leverage the U.S. network for endeavors like Ukraine’s reconstruction.
However, some analysts believe that if China seeks to counteract this South Korea-U.S.-Japan collaboration, South Korea might face the greatest repercussions. China remains the country with the most significant share of South Korea’s exports, with roughly 40% of South Korea’s core semiconductor products being sold in China.
Bloomberg commented, “South Korea has been slightly more hesitant than Japan to join the trade regulations of the Biden administration, which focuses on curbing China’s advancements in the high-tech sector.” The article also hinted at a possible terse response during China’s Foreign Ministry regular briefing on Aug. 21, adding, “We need to watch if there will be economic blowback for Japan and South Korea, both of which have China as their largest trading partner.”