President Biden’s recent visit to South Korea, meeting the heads of South Korean conglomerates, and a plan to visit Samsung’s semiconductor fab are closely related to a restructuring of the US-centric supply chain. The meeting between President Biden and the heads of the four major corporate groups was not merely to encourage economic cooperation between the two countries and investment in the United States, but to go one step further and to strengthen cooperation in economic security, such as with the supply chain of semiconductors and batteries. Samsung’s foundry (semiconductor OEM) plant to be built in the US, Hyundai’s electric vehicle production base, and SK Hynix and LG’s electric vehicle battery plant, etc., are said to be critical for the United States supply chain, as well as essential achievements in creating jobs on a grand scale. This demonstrates that South Korea’s position in the global supply chain has increased.
These days, semiconductor executives around the world are deeply concerned about the supply chain. Purchasing managers at semiconductor companies wonder when and where supply chain problems will arise. Making a semiconductor the size of a fingernail requires the collaboration of tens of thousands of people working for tens of thousands of companies in hundreds of countries around the world. It also uses tens of thousands of different raw materials and equipment. If just one or two of these raw materials, equipment, and parts are not available, the semiconductor fab may stop operating.
The memory supply chain is not stable if only a few thousand Samsung Electronics’ partner companies are running well. Hundreds of thousands and millions of companies that supply to thousands of Samsung Electronics partner companies should not have problems with manpower, logistics, and raw materials.
The COVID 19 outbreak and the shortage of semiconductors for automobiles caused a situation in which automobile factories around the world stopped production. At first, it was considered a temporary problem, but now it is predicted that it will take two or three years to solve the automotive semiconductor supply problem.
When the war in Ukraine broke out, the supply and demand of rare gases such as neon, krypton, and xenon were urgent, and prices skyrocketed. Even today, this is still difficult to buy. Its price has jumped more than tenfold. When 3M’s refrigerant plant in Belgium was closed due to environmental regulations, it created an emergency for global semiconductor fabs. When the 200 square meters sized Berlin plant, which produced ASML’s small parts called wafer clamps, caught fire, large semiconductor companies such as Samsung Electronics, TSMC, Intel, and Micron were at risk of disruption in the introduction of advanced processes. ASML, which assembles 400,000 parts and makes 50 EUV scanners a year, must have suffered extreme difficulties in supply chain management. I wonder how the ASML representative felt when he said that he was looking for urgent parts by tearing down a washing machine.
SurplusGLOBAL, a company that deals in used semiconductor equipment, is also in a supply chain crisis. As the delivery period for new equipment has increased several times in one or two years, customers are constantly looking for used equipment that can be put into production right away. Some prices for used equipment has increased more than ten times the original price, so it’s difficult to tell customers the price. Orders for parts or various semiconductor equipment, such as FPGAs, PLCs, pumps, chillers, motors, and generators, are pouring in from customers all over the world.
If one weak link in the complex semiconductor supply chain is broken, the $600 billion semiconductor market will feel the impact. The blow will spread like dominoes to all industries, including electronics, automobiles, machinery, shipbuilding, and chemicals. Automobile factories cannot operate due to a shortage of semiconductors for vehicles, and it has become common for used car prices to be higher than new car prices.
As the trade war between the U.S. and China intensified in 2018, COVID 19 struck, and the Ukraine war broke out. In 2021 alone, many experts predicted that the global supply chain problem would improve in one year, but it is now 2022, and the problem has become more serious. If the lockdown in Shanghai due to the coronavirus is prolonged, the global economy will be shocked and staggered beyond comparison with the war in Ukraine.
If we look back, the history of mankind has changed whenever the supply chain changes due to the development of new technologies, climate change, natural disasters, and war. Homo sapiens overtook its predecessors, Neanderthals, and Homo erectus, to become the dominant human race because it developed supply chains by sharing food with non-kins and conducting long-distance trade. Evolutionary anthropologists believe that Homo sapiens’ “transport and exchange instincts” began in eastern and western Africa 100,000 years ago. Tens of thousands of years ago, during the Neolithic Age, obsidian from Mt. Baekdu, Armenia, Melos Island in the Mediterranean Sea, and Chaiten Volcano in Chile was sold hundreds and thousands of kilometers away and was usefully used as survival tools such as swords, arrowheads, and axes. Throughout history, collective intelligence created the global division of labor, and the supply chain has become more complex. Now, “When the supply chain changes, the history of mankind changes.”
Jang Bogo, who ruled the seas of East Asia in the late Silla era in the 8th century, achieved wealth and power enough to be worshiped as a god by conquering the East Asian seas when the land Silk Road and the Maritime Silk Road were connected. It is said that a culture that was popular in Samarkand, Uzbekistan became popular in Gyeongju of Silla several months later.
The Mongol Empire, established in the early 13th century, swept over the Eurasian continent, creating an unprecedented wide-area network in human history, providing a platform for people and cultures worldwide to exchange and fuse. Although it does not come up often in the history textbooks we learned from, Genghis Khan and the Mongol Empire were the pioneers of globalization that opened the era of global integration before the Renaissance and the Age of Discovery. The gunpowder developed by Chinese alchemists, combined with Muslim flamethrowers during the Mongol Empire and applied to European bell casting technology created a revolutionary weapon, the cannon, and European hegemony began.
Since the 15th century, when the European age of voyages with overwhelmingly powerful guns and cannons began, the world has become more open, with many goods traded globally. The global supply chain has continued to run through every corner of the world like a thread. Korea and China failed to catch on to the flow of the industrial revolution led by Europe and became colonies in the 20th century. However, after liberation from the ravages of war, Korea has reached the threshold of an advanced country by exquisitely riding the flow of neoliberalism and the bipolar system of the Cold War era. However, in an era when the global supply chain is declining due to the US-China trade war and COVID 19, the future of Korea is once again becoming unstable. The neoliberal system that led the global economy for the past 30 years has been collapsing since the financial crisis. The tide of nationalism and the new Cold War is coming.
At the beginning of the Ukrainian War, an American consultant argued that because there are few direct supply chain links between the United States, Ukraine, and Russia, the war would have little effect on the United States. However, as the war continues, concerns are growing that “the war in Ukraine will lead to a global economic recession.” In the era of the 4th industrial revolution, the world’s supply chain has become highly complex. Even if one weak link in the supply chain is broken, a chain reaction can occur, which can have a global impact.
Although the world is becoming a blockade and national self-interest is strengthening, paradoxically, to solve the global supply chain crisis, the world needs to be more closely connected. This is because it is difficult to predict which link will break in which situation in the complex global supply chain. Although the U.S. is trying to exclude China from its global supply chain, the US has no choice but to rely on China’s production capacity, with the few exceptions of some high-tech industries like semiconductors. The world had no choice but to depend on China’s production capacity was observed by the whole world during the mask crisis two years ago. The hyper-connected supply chain of neoliberalism led by the United States has tightly connected the world. It is difficult to predict when and where supply chain problems will arise, and it is difficult to predict how long this supply chain crisis will last. Resolving the supply chain crisis brought on by COVID 19 can only be solved by close cooperation and connection around the world.
Now, the United States is trying to reorganize its global supply chain in high-tech industries such as semiconductors, centering on the United States. It is expected that President Biden of the United States and President Yoon Seok-ryeol of South Korea will solve the complex equation of the global supply chain.