South Korean authorities have urged their American counterparts to review the chip law’s rules for granting subsidies to semiconductor manufacturers, arguing that this US law could negatively impact South Korea’s business in China.
The US “Chip Act” provides a total of 52 billion US dollars in subsidies for chip manufacturers who invest in the construction of semiconductor factories in the USA. At the same time, it provides for restrictions on the recipients of the allocated funds. In particular, the possibilities of setting up and modernizing production in China in the next 10 years after receiving the funding are limited.
The problem is that while South Korean companies like Samsung and SK Hynix are taking advantage of these subsidies, they also have a strong business in China that they clearly want to keep innovating and improving. Against this background, the South Korean authorities are asking the US to reconsider some definitions, such as “obsolete semiconductors” and other key concepts and terms. In Korea, they hope the restrictions imposed will not put an undue burden on companies investing in the US.
South Korea also requested clarification of the procedure for imposing restrictions that would require the return of US funds to recipients who knowingly engaged in joint research and product licensing, along with “foreign companies that are a cause for concern” in the USA.
Samsung, the world’s largest maker of memory modules, is already building a $17 billion plant in the US, and SK Hynix plans to build a semiconductor packaging plant in the country. Businesses have become hostage to US-imposed restrictions that threaten their ability to compete in China. Under US Chip Act rules proposed in March, companies must not expand advanced semiconductor manufacturing in China by more than 5% in a decade. In Korea, this value is to be increased to 10%. South Korean manufacturers produce a lot of DRAM and NAND memory in Chinese factories. Notably, Samsung produces about 40% of the country’s NAND memory and SK Hynix about half of its DRAM memory.
As you know, in October, the United States re-imposed anti-Chinese sanctions to curb the development of China’s semiconductor industry. In particular, companies are prohibited from supplying China with technology to manufacture DRAM chips manufactured using technical processes more advanced than 14 nm and NAND memory with 128 layers or more. Samsung and SK Hynix have been granted a one-year reprieve and continue to be able to supply sanctioned equipment to their factories. The companies look forward to extending these delays. Still, experts believe it will be difficult for South Korean companies to significantly modernize or expand their production lines in the country, which will hamper their competitiveness in China. According to experts, companies are still simply trying to buy time, hoping for the best but preparing for the worst.