Wednesday, September 28, 2022

US restructures supply chains with South Korea and Taiwan to disconnect CCP

On May 21, 2021, US President Joe Biden met with South Korean President Moon Jae-in in the White House. On the same day, Biden and Moon had a joint statement, which states that the United States and South Korea will strengthen cooperation in the fields of advanced technology, vaccines, climate issues, economics and many others. Advanced technological collaboration is prioritized below.

The United States and South Korea have confirmed that they will build a strong and resilient supply chain and deepen space and cyber cooperation, which will ensure a reliable and value-oriented digital and technological ecosystem. The two parties are committed to increasing mutual investment, including semiconductors and chips, as well as research and development cooperation in the field of artificial intelligence (AI), next-generation communications networks (6G), quantum technology, biotechnology and many others.

Hong Kong financial analyst Katherine Jiang Tianming said in an exclusive interview with The Epoch Times that the United States was leading the disconnection of China’s global supply chains. If we look back at the measures that the United States has taken in recent years, there are three parts. The resilient supply chain between the US and South Korea is the third part of the US-led global decoupling of China.

As the global supply chains disconnect, the economy of the Chinese Communist Party (CCP) will be in a more difficult position.

Part 1: Establishing a decoupling mechanism in the regulatory and legal sectors

On May 15, 2019, former President Donald Trump signs an emergency manager order the provision of information and communication technology and service supply chains, which prevent US companies from using telecommunications equipment that poses a national security threat. This laid the groundwork for the exclusion of Huawei Technologies Co., Ltd. (Huawei) of the US telecommunications supply chain. On May 16, 2019, the U.S. Department of Commerce will place Huawei on the Entity list and issued a prohibition rule in May 2020 that any company must require U.S. government licenses for the sale to Huawei of semiconductor products incorporating U.S. technology. This has severely hampered Huawei’s ability to purchase key components such as chips in the United States.

On May 11, 2021, Biden expanded Trump’s restriction on the CCP-backed Huawei. This was a further economic countermeasure by the US government against the CCP after Biden’s 100-day supply chain review on chips, pharmaceuticals, rare earths and other industries issued on 24 February 2021, and the Strategic Competition Act of 2021 (pdf) adopted by the U.S. Senate on April 21, 2021. On May 12, 2021, the Senate passes the Endless Frontier deed to strengthen US investment in technology in another step to counter the CCP.

Jiang believes that the signing of these executive orders and the adoption of these laws was a regulatory and legal mechanism for the decoupling of China.

Part 2: Restructuring Supply Chains at the Strategically Important Nation – Taiwan

On May 6, the Taiwan Foreign Trade Development Council (TAITRA) held a book launch event for ‘Road map to Resilient Supply Chains. The foreword to this book is not only TAITRA but also the American Institute in Taiwan.

“This clearly shows the world that the United States and Taiwan are jointly restructuring the supply chains,” Jiang said.

“Roadmap to Resilient Supply Chains” gives a clear explanation of the changes in the supply chains: the former supply chain model was that Taiwan first took orders, and outsourced intermediate goods such as components to China to export the final products to developed countries. However, the model will change. In general industries, such as clothing and hats, the CCP economy will continue to play a ‘compositional role’ throughout the industrial chain, but Southeast Asian countries will step in and share a piece of the pie.

Screenshot of a presentation “Roadmap to Resilient Supply Chains” by the Taiwanese Council for External Trade Development. (TAITRA / Screenshot via The Epoch Times)

In terms of strategically important industries, the CCP will be excluded from the entire industry chain and Taiwan will cooperate with like-minded countries in production and technology. These key industries include semiconductors, personal protective equipment (PPE), electric vehicles, etc.

Epoch Times Photo
Screenshot of a presentation “Roadmap to Resilient Supply Chains” by the Taiwanese Council for External Trade Development. (TAITRA / Screenshot via The Epoch Times)

The United States has recently increased its cooperation with Taiwanese manufacturers. On May 20, US time, US Secretary of Commerce Gina M. Raimondo once again held a virtual semiconductor summit, where one of the most important issues was the shortage of semiconductor car chips. The leader of Taiwan’s foundry production, Taiwan Semiconductor Manufacturing Company (TSMC), was also invited to the summit and announced that it has increased the microcontroller unit (MCU) to support the global automotive industry. production with 60 percent above last year’s levels. The company has taken unprecedented action and will continue to work with the car supply chain to mitigate the ongoing crisis for the shortage of chips.

TSMC announced last year that it would do so invest more than $ 10 billion to build a foundry in Arizona. Taiwanese Media Central News Agency (CNA) and Liberty Times Finance once reported that Europe and Japan expanded an olive branch to TSMC and invited TSMC to build plants there.

Jiang said that TSMC is like a miniature of Taiwan. Taiwan’s high-tech superiority and the worldwide scarcity of chips have highlighted the global popularity of TSMC and the strategic importance of Taiwan in global supply chains. The United States worked with Taiwan to restructure the supply chain, while also making it clear that the removal of the CCP from strategically important industries is the second part of the disconnection of the CCP’s global industrial chain.

The future supply chain model set out in the Roadmap to Resilient Supply Chains does not include South Korea. Jiang believes this may be because South Korea has a deeper economic relationship with the CCP.

Part 3: Strengthening cooperation with South Korea

South Korea plays a crucial role in global advanced technology. According to TrendForce, the South Korean company, Samsung Electronics Co., Ltd. (Samsung) is the second largest manufacturer in the world’s foundry market after TSMC, and is far ahead of its global counterparts in the dynamic random access memory (DRAM) and NAND flash memory markets. In the first quarter of 2021, Samsung had 42 percent of the DRAM mark SK Hynix Inc. (SK Hynix), another South Korean company, owned 29 percent. Micron Technology, Inc. (Micron), a US company, owned 23 percent.

Samsung has invested heavily in the economy of the CCP. According to Samsung’s annual report for 2020 (pdf), on December 31, 2020, established 33 subsidiaries, including a semiconductor factory in Xi’an, Shaanxi Province. In 2020, Samsung’s sales revenue is second only to that of the United States and Europe, and it is more than that of South Korea and the African and Asian regions, excluding China.

On May 21, the Presidents of the United States and South Korea met in the White House and a joint statement, which states that the two parties will build a resilient supply chain in advanced technology based on a shared value of open market protection, democracy, human rights and the protection of intellectual property rights. Jiang said the CCP was incompatible with the United States and South Korea in terms of open market, democracy, human rights and intellectual property protection.

The United States is continuing to disconnect the CCP supply chain. South Korea is now strengthening co-operation with the United States, and as the decoupling mechanisms have been put in place in its regulatory and legal sectors, it is likely that South Korea will also gradually disengage from the CCP.

Jiang pointed out that the disconnection of US supply chains from the CCP will gradually cause an economic predicament for the CCP because there are a number of middle- and low-end industries that are technically deficient.

Like Huawei, its smartphone business experienced a severe decline after two consecutive years of U.S. sanctions. Huawei reflects to some extent the economic condition of the CCP.


Nation World News Desk
Nation World News Desk
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