2 weeks Ago By Jo He-rim
Donald Trump's second presidency is unsettling the chip industry globally as the outspoken leader had publicly threatened during his campaign to cut subsidies for chipmakers while raising tariffs on foreign firms. South Korea, home to the world’s top two memory chipmakers, is no exception. Experts suggest that Korean should leverage its strengths in artificial intelligence chips and further bolster ties with the new US administration.
One of the imminent concerns is the possibility of the Trump administration repealing the predecessor's CHIPS and Science Act, aimed at attracting chipmakers to build advanced chip factories on American soil by providing billions of dollars of federal funding. Trump has called the act "so bad," and insisted that imposing tariffs is the way to push companies to build chip factories in the US, rather than via federal subsidies and tax credits. If Trump tries to go through the process of repealing the CHIPS and Science Act, it could deal a major blow to Samsung Electronics and SK hynix currently building chip factories in the US and awaiting grants promised by the US Commerce Department for their significant investments.
Under the Biden administration, the US Commerce Department promised Samsung Electronics up to $6.4 billion funding for the chip giant's construction of a $45 billion chip foundry facilities in Taylor, Texas. SK hynix is waiting for up to $450 million of federal subsidies for its investment of $3.
87 billion to build an advanced chip packaging plant in Indiana. Given Trump's critical remarks, many analysts predict he could attempt to go through the process of repealing the bipartisan CHIPS Act. Others believe Trump would likely attempt to make minor changes, such as reducing the amount of subsidies or change the workforce requirements for the ongoing projects.
"The CHIPS Act did succeed in attracting global chip facilities on the US soil, and will create jobs," said Lee Jong-hwan, a system semiconductor engineering professor at Sangmyung University. "Trump is an unpredictable figure so it is hard to predict, but he would be aware of the benefits of the CHIPS Act for the US, and is likely to make little adjustments." Trump's envisioned high tariff policy and decoupling strategy to isolate China from the global supply chain is expected to have both benefits and challenges for Korean chipmakers, experts say.
Korean chipmakers could also benefit in the long term when Trump's high tariffs on chips made outside of the US force companies to produce chips in the American soil, according to Park Jae-geun, a professor of electronic engineering at Hanyang University. TSMC, the Taiwan-based foundry producing some 80 percent of the world's cutting-edge chips, stands as the favorite chip manufacturer for global tech giants. While the company produces majority of advanced chips in the world from its fabs in Taiwan, it will not be able to supply all the demands from the two factories it is currently building in the US, Park Jae-geun, a professor of electronic engineering at Hanyang University, said.
"So the chances would go up for Samsung to bag the rest of the foundry orders that TSMC cannot take," Park said. With Trump expected to reinforce trade curbs against China, Samsung and SK hynix may face difficulties in operating their chip manufacturing facilities in China. The Biden administration implemented a sweeping set of regulations to ban the export of certain semiconductor chips made using US technology and advanced chip equipment to China in 2022.
For the two Korean chipmakers, the US has granted waivers allowing them to import tools without having to apply for a license. Under Trump, the Korean chipmakers may have to go through complex processes to apply for the license. In order to mitigate risks and gain negotiating power against the Trump administration, Korea should leverage its technological edge in high-value AI chips, experts said.
"The paradigm in chip industry is shifting fast towards high-value AI chips. Whatever Trump does, Korean companies hold an edge in AI memory chips that are high in demand, and this should be their negotiating power," Lee of Sangmyung University said. Park echoed Lee's view, noting how the US would not want to strain relations with Korea when it aims to gain dominance in the AI industry.
"US has major players in the AI sector, like Nvidia, Intel, Google and Apple. These companies need Korea's AI chips, such as High Bandwidth Memory and CXL for advancement," Park explained. "Technology is the negotiating card.
The Korean government and chipmakers should work together to persuade the Trump administration that we are the critical partner for its AI advancement.".
