South Korea’s semiconductor chip makers are in a difficult position as the United States distributes incentives worth about US$53 billion, or about Rp781 trillion. South Korean manufacturers, Samsung Electronics and SK Hynix, are worried about losing China as a trading and trading partner.
Currently, the United States (US) is developing chip manufacturing in South Korea, fearing that China will overtake its role in global supply chains.
derive from starSouth Korea wants to be in a balanced position between its two major trading partners. Manufacturers Samsung Electronics and SK Hynix chose to avoid geopolitical conflicts that could harm business interests.
Pressure from Washington is expected to mount after US President Joe Biden signed the Chips and Science Act on Tuesday (9/8).
The passage of the law boosts Washington’s efforts to form the Chip4 Alliance, a partnership that includes South Korea, Taiwan and Japan. Beijing sees the alliance as a conspiracy by the US government to cut China out of the global semiconductor supply chain.
Gary Ng, senior economist at Asia-Pacific investment bank Natixis, said if Samsung and SK Hynix took advantage of funding from Washington, it would affect the expansion of their two companies in China.
By accepting US aid, subsidy recipients are barred from expanding production in China beyond “old semiconductors” – defined as chips with process technology of 28 nanometers or more – for 10 years. .
The US government has the power to decide what will be classified as legacy devices in the memory chip market segment, of which Samsung and SK Hynix are the two largest manufacturers in the world.
However, Samsung and SK Hynix have invested heavily to build and operate chip foundries in mainland China. Therefore, it is impossible for both companies to give up assets and business interests in the world’s second largest economy.
Arisa Liu, a senior semiconductor researcher at the Taiwan Economic Research Institute, said South Korea was under more pressure than Taiwan. This is based on Samsung’s investment in China since 2012 which has reached US$25.8 billion.
Samsung’s two factories in Xian account for 42 percent of the company’s total NAND flash (chips) production capacity.
“If these two big manufacturers in China can no longer use the (more advanced chip manufacturing) process, they may gradually lose their competition,” Liu said.
Meanwhile, SK Hynix has a factory in Wuxi that accounts for 45% of the company’s total dynamic random-access memory (DRAM) production capacity.
Keeping China’s manufacturing operations relevant in the global semiconductor industry reflects how the Seoul government does its job as they navigate the choppy diplomatic waters between the US and China.
On the same day that the US Chips and Science Act was passed, representatives of China and South Korea met in Qingdao to strengthen ties amid geopolitical tensions and a stable supply chain.
Criticizing the new US law, Chinese Foreign Minister Wang Yi said that China is against the politicization of the economy and trading weapons.
Earlier, South Korean President Yoon Suk Yeol sought to pacify the country joining the US-led Chip 4 coalition and promised to prioritize national interests in determining Seoul’s actions.
“Relevant government agencies will study and discuss the matter to protect national interests,” Yoon said.
However, both Samsung and SK Hynix have hedged their plans for large new semiconductor manufacturing in the US.
In July, Biden praised plans for SK Hynix’s parent company, SK Group, to invest $22 billion in semiconductor, green energy and bioscience projects in the US.