Prolonged political turmoil leaves Korean firms without US negotiating power
South Korean chipmakers are in a tough spot as US President Donald Trump threatens to revoke the federal subsidies pledged to them for building advanced semiconductor production facilities in the US, escalating his attacks on his predecessor’s chip support program.
Although some view Trump’s remarks as political posturing aimed at pressuring chipmakers to invest more, companies that have already committed tens of billions of dollars are feeling the strain.
“We are in a very difficult position without the US subsidy. Our investment plan came about after a close negotiation with the US government under the Biden administration. We signed a contract — it is a promise,” said an industry official who wished to be unnamed.
"We are a profit-driven company. We cannot proceed with (investment) if it leads to serious losses and a management crisis."
On Friday, Trump reiterated his criticism of the CHIPS and Science Act, calling it a "tremendous waste of money," while also accusing Korea and Taiwan of having “stolen” the US chip industry.
"We gradually lost the chip business, and now it's almost exclusively in Taiwan. They stole it from us. They took it from us," Trump said during a press availability at the White House. He added that the US once dominated chip manufacturing but now has "almost nothing — just a little in South Korea, but mostly in Taiwan."
During a joint address to Congress the same week, Trump said the US should "get rid of" the CHIPS Act, calling it "horrible."
The CHIPS and Science Act, signed into law by former President Joe Biden in 2022 with bipartisan support, allocated $39 billion in grants to boost domestic semiconductor manufacturing.
Under the initiative, the US has attracted hundreds of billions of dollars in investments from global semiconductor giants such as Intel, TSMC and Samsung Electronics, with the Biden administration promising to distribute incentives before leaving office in January.
Samsung Electronics, the world's largest memory chip maker, secured $6.4 billion in federal funding for its $37 billion investment in leading-edge chip manufacturing plants in Texas.
SK hynix is also set to receive $458 million for constructing a $3.87 billion advanced chip packaging facility in Indiana.
If the CHIPS Act is repealed, Korean semiconductor firms may be forced to reconsider their US investment strategies, adding further uncertainty to the whole industry and its intertwined global supply chains.
However, Trump’s repeal proposal faces resistance in the US Congress. Both Democratic and Republican lawmakers argue that the chip support program is critical to national security.
“I think reconstituting domestic manufacturing of advanced semiconductors is a national security and economic imperative,” said Sen. John Cornyn of Texas, who was one of 17 Senate Republicans who voted for the law.
Sen. Thom Tillis, a North Carolina Republican, also said, "That’s not going to happen."
“It was a statement at a joint address, but do you really believe we have eight or 10 votes from the Democrat side to repeal it, even if on its face we thought it was a good idea?” the senator said, referring to Trump's comment made to Congress last week.
Industry experts suggest that Trump’s rhetoric may be a negotiating tactic aimed at pushing chipmakers to invest more.
Last week, Taiwanese chip giant TSMC announced an additional $100 billion investment in the US, adding to the $65 billion it had previously pledged.
For Samsung Electronics, however, making additional investments is not ideal, as its Texas fab is still under construction and lacks potential customers.
The leadership vacuum in South Korea is further complicating matters for chipmakers. With President Yoon Suk Yeol suspended from his duties and facing trial on insurrection charges following his botched martial law attempt, industry officials say the absence of leadership is hindering negotiations with the US.
"We need government support, but there is no one (president) to lead negotiations with Trump. When leaders meet, working-level discussions can move faster," said another industry official who also requested anonymity.
Lee Jong-hwan, a system semiconductor engineering professor at Sangmyung University, stressed that securing major tech giants as clients is more crucial than government subsidies.
"Federal subsidies are important, but when you consider the scale of the business, they may not be the deciding factor. For Samsung, securing major tech firms as customers is far more critical," Lee explained.
He warned that Samsung’s Texas foundry could face serious risks if it fails to attract large clients.
"Companies have no choice but to invest in the US under the current situation. If Samsung cannot operate the Texas foundry due to a lack of customers, it will put the company in peril," he added.
herim@heraldcorp.com
