South Korea faces challenging choices as the great-power rivalry between the United States and China intensifies. In this report, the authors describe their key insights from an analytical policy game they designed featuring two scenarios that explored the policy choices for South Korea to balance its economic, geopolitical, and technological equities regarding its role in the global semiconductor and electric vehicle battery supply chains.

Technology Innovation, Economic Growth, and Geopolitics Policy Options for South Korea

A Policy Game

Yun Kang, David A. Shlapak, Seok Joon Kwon, Daniel Gonzales, Natalia Henriquez Sanchez, John J. Lee, Dong Ho Chung, Miyeon Oh, Bradley Martin, You Won Park, et al.

ResearchPublished Sep 17, 2024

South Korea faces challenging choices as the great-power rivalry between the United States and China intensifies. The Republic of Korea (ROK) is a global leader in the design and production of critical advanced semiconductor-related technologies and aspires to duplicate that success in the burgeoning electric vehicle marketplace. However, South Korea's policy options are complicated by its needs to remain closely tied to the United States and to maintain a generally nonhostile relationship with China.

In this report, the authors describe their key insights from an analytical policy game they designed and executed that featured two scenarios: In the first, the United States expands measures against China and its indirect pressures on South Korea, and in the second, China offers incentives to South Korea to encourage elevated cooperation between Seoul and Beijing in the semiconductor industry. The players were divided into two teams: One focused on security and diplomacy while the other focused on economic growth and innovation. The teams discussed potential policy choices for South Korea regarding its role in the global semiconductor and electric vehicle battery supply chains in the context of these scenarios, and this report summarizes their perspectives and recommendations for balancing South Korea's economic, geopolitical, and technologies equities.

Key Findings

Both teams agreed that South Korea's interests demand a continued close partnership with the United States

  • Even though participants acknowledged that U.S. policy choices could have negative effects on South Korea's economy, moving closer to China was perceived to be too risky for the ROK and incommensurate with any expected benefits.
  • There was a sense, at least among some players, that China is an untrustworthy partner for South Korea.

A consistent theme was the need to consider short-term and long-term trade-offs

  • South Korea's semiconductor industry would suffer in the short term because of U.S. restrictions. However, the ROK might benefit in the long term because of the disruption to China's emergence as a serious competitor in the high-tech industry.
  • South Korea is not entirely free of China's growing competitiveness in the memory chip industry, particularly in flash memory manufacturing.
  • Much discussion centered on the question of whether—and how—South Korean firms could ride out the short-term damage inflicted by more-severe sanctions on China; for example, the United States could provide the ROK with government support via direct subsidies or incentives.

The U.S.-China rivalry requires South Korea to more closely align its political, security, and economic interests with each other

  • Ideally, South Korea would gain maximum benefit from economic interchange with China while retaining a reliable security commitment from the United States.
  • However, both teams agreed that the increasingly antagonistic U.S.-China relationship has rendered this balancing act to be untenable over the long term.

Recommendations

  • Even though the relationship between South Korea and the United States is complicated and, at times, problematic for the ROK, this relationship is critical to South Korea's security and economic health. The relationship must be kept strong and, when possible, further strengthened.
  • Strengthening the relationship will require changes in South Korean and U.S. behavior to minimize unanticipated disadvantages created by any policy actions and to promote technological cooperation.
  • South Korea should work with the United States and others to agree on a common suite of export controls and to diversify the sources of supply away from China.
  • Even though the ROK-U.S. relationship cannot be risked by economic incentives from China, South Korea needs a basis on which it can continue to preserve its ties with China.

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  • Copyright: RAND Corporation
  • Availability: Available
  • Year: 2024
  • Print Format: Paperback
  • Paperback Pages: 56
  • Paperback Price: $15.00
  • Paperback ISBN/EAN: 1-9774-1396-X
  • DOI: https://doi.org/10.7249/RRA2969-1
  • Document Number: RR-A2969-1

Citation

RAND Style Manual
Kang, Yun, David A. Shlapak, Seok Joon Kwon, Daniel Gonzales, Natalia Henriquez Sanchez, John J. Lee, Dong Ho Chung, Miyeon Oh, Bradley Martin, You Won Park, and Christian Curriden, Technology Innovation, Economic Growth, and Geopolitics Policy Options for South Korea: A Policy Game, RAND Corporation, RR-A2969-1, 2024. As of October 10, 2024: https://www.rand.org/pubs/research_reports/RRA2969-1.html
Chicago Manual of Style
Kang, Yun, David A. Shlapak, Seok Joon Kwon, Daniel Gonzales, Natalia Henriquez Sanchez, John J. Lee, Dong Ho Chung, Miyeon Oh, Bradley Martin, You Won Park, and Christian Curriden, Technology Innovation, Economic Growth, and Geopolitics Policy Options for South Korea: A Policy Game. Santa Monica, CA: RAND Corporation, 2024. https://www.rand.org/pubs/research_reports/RRA2969-1.html. Also available in print form.
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This research was prepared for the Chey Institute for Advanced Studies and conducted within the Acquisition and Technology Policy Program of the RAND National Security Research Division.

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