This photo, provided by Samsung Electronics Co., shows the tech giant’s new production line (P3) in Pyeongtaek, 70 kilometers south of Seoul, the largest chip manufacturing facility ever built to date by Samsung, whose production of state-of-the art NAND flash began on Sept. 7, 2022.
SEOUL, March 13 (Korea Bizwire) — In the late 1980s, Japan was a semiconductor powerhouse, accounting for more than 50 percent of sales by country and region.
However, Japan’s semiconductor industry has declined, and the market is now dominated by Taiwan and South Korea, with the U.S. perceiving China’s growth as a threat.
The U.S. is attempting to move the Korean and Taiwanese semiconductor industries to the United States, with observations that Korean semiconductor giants Samsung Electronics Co. and SK hynix Inc., as well as Taiwanese chipmaker TSMC, will lose 75 percent of their profits to the U.S. government and will be obligated to provide advanced technology to American authorities.
The Korean semiconductor industry is in a perplexing position after the U.S. administration recently revealed the criteria for semiconductor subsidies under the CHIPS Act.
In particular, Samsung which has already selected a site and is investing in the U.S., has to decide whether to apply for the subsidy or not.
This is because the subsidy policy clearly reflects the U.S. government’s intention to reorganize the semiconductor production system centered on itself and its allies, excluding China.
The U.S. Department of Commerce has stated that companies receiving semiconductor subsidies of more than US$150 million must share a portion of their excess profits with the U.S. government.
The Commerce Department has also stated that it will prioritize companies that are willing to provide advanced semiconductors for defense and security applications or provide semiconductor facilities to the U.S. government.
This file photo, provided by Samsung Electronics Co. on March 30, 2021, shows the company’s chip plant in Austin, Texas.
Semiconductor industry insiders and experts say the guidelines are toxic, with the most controversial provision being “excess profit sharing.”
It is the process of verifying excess profit sharing that is more toxic than the concept itself.
To determine whether a company has made excess profits, it must submit internal information to the U.S., including financial statements and cash flow projections.
Companies must also provide access to advanced semiconductor manufacturing facilities that contain their core technology. This is a tough ask for companies.
Companies are at risk of technology leaks in the process. In fact, the semiconductor industry believes that even the equipment a company uses and how it is deployed can be valuable trade secrets.
In the U.S., Micron Technology Inc. is chasing Samsung in memory and Intel in foundries. Some have suggested that Samsung’s manufacturing know-how could flow to these companies.
In February, South Korea’s semiconductor exports totaled $5.96 billion, down 42.5 percent from the same period last year, and marking the seventh consecutive month of decline amid the global economic slowdown.
For the Korean semiconductor industry, which is still struggling to recover, the CHIPS Act guidelines announced by the U.S. Department of Commerce on Feb. 28 are a huge blow.
U.S. President Joe Biden (3rd from L) and South Korean President Yoon Suk-yeol (R) look around a Samsung Electronics chip plant in Pyeongtaek, 70 kilometers south of Seoul, on May 20, 2022. Biden arrived in South Korea that day for his first visit to the country since he took office. (Yonhap)
Critics say the U.S. industrial policy, under the guise of national security, is going beyond China’s checks and forcing allies to make sacrifices.
Companies that receive subsidies from the CHIPS Act will not be able to produce a certain level of advanced semiconductors locally for the following 10 years.
Samsung Electronics reportedly produces 40 percent of its NAND flash shipments in Xi’an, China, and SK hynix produces 40 to 50 percent of its DRAM memory at its Wuxi plant.
With large-scale production facilities in China, South Korean semiconductor companies rely on the Chinese market for 40 percent of their semiconductor exports.
The majority of South Koreans have also expressed great concern about the crisis facing the country’s semiconductor industry.
According to the results of a recent survey on “Public Perceptions of High-Tech Industries” conducted by the Korea Chamber of Commerce and Industry on Sunday, close to 80 percent of Koreans perceive the issue of fostering high-tech industries such as semiconductors as an economic security issue, while 60 percent are in favor of additional government support for large companies.
Jerry M. Kim (jerry_kim@koreabizwire.com)
