In 1986, the US humbled Japan’s dominant chip sector. Is Korea next?

(courtesy Samsung Electronics)

In July, SK Group Chairman Chey Tae-won, whose conglomerate owns the chipmaker SK Hynix, issued a warning: “Current memory prices are not normal. If they don’t fall, we could face the same situation as Japan once did, and neither the US nor China will stand idly by.”

He was recalling what happened 40 years ago when Japanese companies, which controlled half of the global semiconductor market at the time, collapsed under American pressure meant to curb their dominance. As Korea’s trade surplus with the US surpasses the US$100 billion mark — something even Japan never pulled off — fears are growing that the Korean semiconductor industry could soon face similar pressure from the US. 

The 1986 semiconductor agreement between Washington and Tokyo emerged at the height of Japanese chip dominance. After the market share of Intel, which first developed DRAM chips, plummeted to around 1%, the US used this accord to prevent Japanese-made semiconductors from being sold below specified price thresholds through the introduction of a fair market value system. 

Washington also pressured Tokyo into increasing the share of foreign-made chips on the Japanese market to approximately 20%.

In 1987, the US slapped 100% retaliatory tariffs on US$300 million worth of Japanese imports. This caused Japan’s share of the global chip market, which was 50% in the late 1980s, to fall to the high 20% range a decade later.

“As the US moved to rein in [Japan], Korea emerged as an alternative production base,” a senior executive in the Korean semiconductor sector said.

With Japanese DRAM prices constrained, Samsung Electronics surpassed Japan’s Toshiba in 1992 to claim the largest share of the global DRAM market for the first time.

The situation in Korea now resembles Japan’s 40 years ago. American clients are increasingly dissatisfied with Korean memory semiconductors, whose prices have soared amid the artificial intelligence investment frenzy.

Apple CEO John Ternus described the memory shortage as an “absolute crisis,” and a class-action lawsuit has been filed in the US alleging that Samsung Electronics, SK Hynix and Micron deliberately cut their DRAM supply to drive up prices.

In September, US Secretary of Commerce Howard Lutnick outlined the future of American tariff policy, saying, “I think what you’re going to see is targeted, thoughtful tariff policy that basically says if you build here, you don’t pay, but if you don’t build here, expect to pay to enter the greatest market in the world.”

Recently, there have been signs of a shift toward reducing dependence on Korea. Following Apple’s testing of products from Chinese chipmaker ChangXin Memory Technologies, the American technology news outlet The Information said Taiwan’s TSMC is mulling Nvidia’s request to make next-generation 3D DRAM amid difficulties in securing memory supply.

TSMC has officially denied rumors that it will enter the DRAM market, but this could signal a bid by chip clients to seek alternatives, much like how the US industry teamed up with Korea’s 40 years ago to keep Japan in check.

Other analysts, however, suggest that the US will find it hard to extract one-sided concessions from Korea as it did from Japan, saying high-bandwidth memory and server DRAM, two sectors led by Korean companies, are essential to the AI infrastructure of American Big Tech.

A semiconductor industry source said, “Since imposing semiconductor tariffs would also harm American companies, the pressure on Korean chipmakers to accelerate investment in the US could intensify.”

“The situation now is fundamentally different from that in 1986, as there’s no alternative to Korea,” said Lee Jun, the director of the Strategic Industries Research Center at the Korea Institute for Industrial Economics and Trade. “But our commanding share of the semiconductor market could turn into a trigger that exacerbates the risks to our economic security.”