EFFECTS OF ATTENDING CHIP4 MEETING

[Anchor Lead]

The South Korean government has decided to join the CHIP4 alliance preliminary meeting. Korea's industrial sector is watching closely the ripple effects of the alliance. With China's influence on Korean semiconductors being a powerful factor to reckon with, the situation is more complex than it appears on the surface.

[Pkg]

Semiconductors are produced using American technologies and equipment, Japanese materials, along with South Korean and Taiwanese manufacturing expertise. If Korea decides to stay away from the CHIP4 alliance, which includes the U.S., Japan and Taiwan, it could be pushed back in terms of tech, materials and supply. Some believe participation in the alliance is imperative to ensure the stable production of electronic chips. However, the decision could provoke China which purchases more than 60 percent of the chips exported by Korea. Korea's industrial sector has no choice but to exercise caution.

[Soundbite] Chey Tae-won(SK Group chair(July 28)) : "I'm still cautious to speak about this. There are still no details as to what CHIP4 exactly is and how it will be carried out. We need more details about it."

Some say even if Korea does join the alliance, it would be difficult for China to impose import restrictions on chips, as it needs D-RAMs, a core component of consumer electronics and IT products, and more than 95 percent of them are produced by Korea and the U.S. However, others fear China might impose restrictions on other items, not just electronic chips.

[Soundbite] Kyung Hee-kwon(Korea Institute for Industrial Economics & Trade) : "This matter requires prudence so that sectors that rely heavily on relations with China or its imports do not suffer a blow."

Minister of Trade, Industry and Energy Lee Chang-yang says the decision on the CHIP4 alliance is based purely on economic interests for Korea and is not intended to ostracize certain countries like China or restrict participants in the meeting. Seoul is trying to figure out the benefits of the alliance and quell China's concerns at the same time.