Trade ministry says ‘unusual conditions’ will make investment in U.S. difficult
Wall Street Journal (Wednesday, March 8, 2023) by Jiyoung Sohn
SEOUL—The U.S. Chips Act is dangling billions of dollars in subsidies in front of the world’s biggest semiconductor manufacturers, but South Korea says there are too many strings attached.
The conditions for receiving the subsidies unveiled last week are putting two of South Korea’s biggest chip makers—Samsung Electronics Co. SSNHZ 0.00%increase; green up pointing triangle and SK Hynix Inc.—in 000660 -2.36%decrease; red down pointing triangle a difficult position as they decide whether to apply for the federal funding, government officials and industry analysts said.
South Korea’s minister of trade, industry and energy described the requirements under the $53 billion chip subsidy program as vast and unconventional. Asking firms to submit information about their management and technology could expose them to business risks, the official, Lee Chang-yang, said Monday. The demand that companies offer child care for employees, together with rising interest rates and inflation, would drive up the already high cost of investing in the U.S., he said.
“There are many unusual conditions that are completely different from the subsidies we generally provide for foreign investment,” said Mr. Lee. He said South Korean officials were discussing those terms with their U.S. counterparts.
Samsung and SK Hynix would also face new restrictions on expanding their chip production facilities based in China if they were to apply for the U.S. chip subsidies.
South Korea’s trade minister, Ahn Duk-geun, will be in Washington, D.C., this week to meet with high-level U.S. government officials, the Ministry of Trade, Industry and Energy said Tuesday. The ministry said it would make the same points in Washington that Mr. Lee outlined in his remarks and stress that if the U.S. wants to stabilize and advance its semiconductor supply chain, it will need the cooperation of South Korean companies.
The U.S. has said many of the requirements in the program are intended to safeguard taxpayer investments and give awards based on rigorous financial analysis and due diligence. “We are not writing blank checks to any company that asks,” Commerce Secretary Gina Raimondo said last week.
The U.S. is seeking to attract more chip production facilities, with the goal of creating at least two manufacturing clusters for cutting-edge semiconductors by 2030, according to the Commerce Department.
In addition to Samsung and SK Hynix, top candidates for the subsidy program include Taiwan Semiconductor Manufacturing Co., the world’s largest contract chip maker, and Intel Corp. Samsung and SK Hynix said they are reviewing the terms and declined to comment further. TSMC declined to comment. Intel has said the Chips Act would make American companies more competitive and restore global balance in the chip making industry.
Samsung and SK Hynix are the world’s two largest memory chip makers. Samsung is building a $17 billion contract chip-making factory for producing cutting-edge semiconductors in Taylor, Texas. SK Group, the owner of SK Hynix, pledged last year to invest $15 billion in semiconductor research and development and facilities for advanced packaging in the U.S.