by Yeseul Woo
The deteriorating relations between the United States, South Korea, and Japan have shaken the security system in Northeast Asia, which hinges on the alliances between the three countries. Observers typically attribute the slump in the relationship between South Korea and Japan to the latter’s removal of South Korea’s favoured “whitelisted” trade partner status, the imposition of export controls on its electronics sector, and South Korea’s August 2019 announcement that Seoul did not wish to renew the General Security of Military Information Agreement (GSOMIA). This is a naïve observation, missing the critical dynamic that is inextricably linked to the South Korea-Japan row–that is, great-power competition in artificial intelligence technology (AI) between the United States and China.
On 30 October and 29 November 2018, South Korea’s Supreme Court ordered Nippon Steel & Sumimoto Metal, and Mitsubishi Heavy Industries respectively to compensate South Koreans forced to work in their factories during the Japanese occupation period. The court ruled, that if the Japanese companies refused to oblige, the victims of forced labour could seek local court orders to seize their Korea-based assets.
Over the course of July 2019, then, Japan imposed export controls on three core materials required by South Korean tech companies to manufacture dynamic random-access semiconductors (DRAMS)—an essential part for 5G networks and AI. The export curbs require Japanese firms to seek licenses to export these materials to South Korea. Because Japan is the main producer of the core materials, the new export procedures disrupted supply chains and in so doing South Korea’s ability to manufacture DRAMS. On 2 August 2019, Japan removed South Korea from its whitelist of favoured trade partners, thereby prolonging and formalising the export curbs on these materials.
Although Japan claimed that the export regulations were designed to streamline export procedures in light of national security concerns, observers believed the new measures came in response to the South Korean Supreme Court rulings on South Korean forced labour in Japanese companies during the occupation period and due to the on-going disagreements between Japan and South Korean on the compensation of comfort women. South Korea’s response came later in August 2019. Seoul announced its intention to terminate GSOMIA, reasoning that Japan’s export restrictions had caused a ‘grave’ change in security cooperation. Although South Korea and Japan have since agreed not to let GSOMIA lapse, the issue of whitelist exclusion has not been resolved. The trade row between the two countries is set to worsen when South Korea will act on its Supreme Court rulings by beginning to seize the Korea-based assets of Japanese companies.
But Japan’s export controls resemble the US-China trade war. Semiconductors are vital components of AI and 5G technology, which are used in surveillance technology and missile defence. They are imperative for national security as for instance, AI is used to predict missile flight paths. The crucial link is this: two Korean companies, Samsung and SK Hynix, are the world’s largest and second-largest manufactures of DRAMS respectively, accounting for 72.7% of the global DRAMS market in the fourth quarter of 2019. But South Korean companies also account for a large proportion of Huawei’s DRAMS supply, China’s main producer of 5G and AI technology. Samsung’s recent launch of the Data and Information (DIT) Center, an effort to produce AI semiconductors, suggests that the company has outpaced its competitors.
South Korea’s DRAMS exports to Huawei might be a national security concern for the United States and Japan. By disrupting South Korea’s supply of the materials needed to manufacture DRAMS, Japan might potentially slow down China’s AI progress. Japan’s export restrictions undoubtedly align with US intentions. The Wall Street Journal reported on 17 February 2020 that the US Department of Commerce plans to restrict Chinese access to chip technology by seeking legislation to ‘require chip factories world-wide to get licenses if they plan to produce chips for Huawei.’ Furthermore, the US Department of Commerce plans on tightening export controls on chips to Huawei; license-free sales are only to be permitted where chips are less than ten per cent American-made. The threshold stands at twenty-five per cent at the time of writing. The United States has also pressured allies like Canada and European countries to contain Chinese semiconductor technology, causing a row between President Trump and Prime Minister Johnson after the UK allowed Huawei a limited role in the development of Britain’s 5G network.
In another twist, however, Japan’s decision to limit South Korea’s access to materials needed for its DRAMS production backfired. The export restrictions were a protectionist move – Japan was arguably hoping that its own companies would thrive once again to become the market leaders, which they were until Samsung and SK Hynix gained a competitive edge. But DuPont, a US chemical materials company, subsequently decided to establish a US$ 28-million production facility for extreme ultraviolet rays in Korea, which will ensure Korea’s supply of the key materials needed for the production of semiconductors. Therefore, if Japan is serious about its ambition to gain market share in the semiconductors industry, it should carefully consider its next steps.
In other words, what we may be witnessing with the row between South Korea and Japan is not so much a dispute over compensation of South Korean forced wartime labourers or comfort women during the Japanese occupation period but the onset of the world’s first tech war: competition between the United States and China over supremacy in AI. South Korea has long aligned with the United States in geostrategic terms, but China’s overtaking of the United States as South Korea’s most important trade partner has placed Seoul in an awkward position as the imposition of Japanese export controls—designed to hit one of South Korea’s major industries—has demonstrated.
Yeseul Woo is a PhD candidate at the Department of War Studies at King’s College London and a Developing Scholar at the Hudson Institute, Washington, D.C. She has previously served as a journalist for South Korean and U.S. media outlets and as a fellow at the East West Center, at the Pacific Forum and at the Harry S. Truman Institute