Questioning the concentration risk in South Korea-US chip pacts

While the US$950 billion chip supply deals between South Korea and US tech firms offer short-term security, critics warn they may create long-term concentration risks. Relying heavily on a single country for critical memory chips exposes the US supply chain to potential disruptions from geopolitical crises, natural disasters, or trade disputes. South Korea itself faces tensions with North Korea and pressure from China, which could destabilize production. The deals could also stifle competition, as smaller chipmakers may struggle to secure orders when giants lock in capacity. This could lead to higher prices for consumers and less innovation over time. Additionally, the massive financial scale of the pacts might encourage over-investment in specific technologies, leaving both sides vulnerable if demand shifts. Critics also point to the lack of transparency in the agreements, which could obscure pricing and terms. For countries like Malaysia, which serve as intermediate assembly hubs, the concentration may reduce their bargaining power. A more diversified sourcing strategy, including greater domestic US chip production, would be a safer approach for the long-term health of the global semiconductor industry.