"In semiconductors alone, no Chinese firm ranks No. 1 globally. They are always followers or underdogs," said Phil S. Lee, executive director at Mirae Asset Global Investments' Hong Kong office. "But we must note that there are many companies positioned as 'at least No. 2' across every segment of the supply chain, from fabless design and foundries to packaging."

Lee described the recent leap of China's semiconductor industry as positioned across the entire supply chain in an interview with the Hankook Ilbo on Wednesday. China's top DRAM maker went public on July 27, and concerns grew over a potential crisis for the three leading memory-chip producers of Korea and the United States: Samsung Electronics, SK hynix and Micron Technology.

"Across all manufacturing processes, China trails by at least two generations, and because it lacks extreme ultraviolet (EUV) lithography equipment, closing the gap with the top three in the short term remains unlikely," he said. "In semiconductors, China's goal is not to catch up with the top companies immediately, but to prevent the gap from widening further."

Still, Korea cannot afford to be complacent. A deep engineering talent pool, which has been propelling China to world-class status in advanced industries such as batteries, electric vehicles, artificial intelligence and robotics, continues to flow into its semiconductor sector.

"Whenever the gap with leading countries widens, Chinese chipmakers seek alternative technical approaches to catch up, such as hybrid bonding to join chips directly and LogicFolding to stack circuits vertically and boost signal speeds," Lee said. "Leading nations will also continue widening the gap, but underdog firms spread across China's chip supply chain will capitalize on what I call an 'engineering dividend' (the advantage provided by a deep R&D talent pool) and continue trying to close the gap."

Lee is a longtime China expert who has managed research and investment involving Chinese companies at Mirae Asset's Hong Kong office since 2010. He offered insights into Chinese industrial development and key corporate players drawn from 15 years of on-the-ground experience for his new book, "China Signal," published by Heritage Books.

Lee emphasized that understanding China is essential, not optional, in a "Tech G2" world where China competes on equal footing with the U.S. over global technological leadership. The Hankook Ilbo interviewed Lee about how China aims to become one of the global tech leaders.

Q: Market interest in China's advanced industries has intensified following CXMT's listing.

A: Over the past decade, China's fierce domestic competition laid the groundwork for producing strong companies, but for individual firms, it acted as a barrier that prevented them from raising profit margins. Because they struggled to generate profits, their stock market performance was poor and failed to attract investors.

But the situation has now changed. Commercially viable survivors have emerged from domestic competition in each major high-tech industry, and sectors are consolidating around them. CXMT is a case in point. Few expected a Chinese firm to build a viable DRAM business, but it defied expectations and established a visible presence.

As seen with BYD (electric vehicle and battery maker), Chinese tech firms are also accelerating their expansion overseas. Going forward, Chinese companies will inevitably draw attention in almost every field.

Q: What is the secret behind China's rapid growth across various high-tech industry?

A: Talent is central to the explanation. Historically, for a nation to grow and reach the top tier, its science and technology must advance. Steering talent into science and technology requires extensive government intervention. The Chinese government consistently encouraged its top talent to enter science and technology, and those efforts are bearing fruit.

When scientific and engineering talent is abundant, it naturally shapes corporate strategy. Just as an abundance of coal encourages people to start coal companies, a large supply of talent holding master's and doctoral degrees naturally leads to founding R&D-focused enterprises. World No. 1 battery maker CATL alone employs over 20,000 R&D personnel. Chinese companies are capitalizing on this 'engineering dividend' with exceptional efficiency.

Q: From an economic perspective, how should investors view China?

A: China must be recognized, alongside the United States, as part of a "Tech G2" leading the development of advanced technologies. In semiconductors, China is likely to remain a follower unless it can produce EUV equipment, but it is undeniable that China is already top-tier in batteries, electric vehicles, robotics and AI.

Until now, investors seeking exposure to global innovation chose the U.S. without hesitation, but they should now include China in their portfolios as well. Because it remains unclear which market will outperform, investors need to diversify their exposure. Understanding China is not optional. It is essential.

This article from the Hankook Ilbo, the sister publication of The Korea Times, is translated by a generative AI system and edited by The Korea Times.