News JVTech The United States has shot itself in the foot: South Korean companies are rebelling against its flea law
The trade war is raging between the United States and China in the semiconductor market. With the two largest chip manufacturers in South Korea, the United States thought it had a sizeable ally there. Yes but now, there has just been a big turnaround.
The United States: new kings of the semiconductor industry?
We have been telling you about the fundamental movements that are shaking the semiconductor industry for some time now. First of all, we must remember what a semiconductor is. This electronic component the size of a grain of sand constitutes an essential part of the overwhelming majority of high-tech products. Smartphone, PC, electric cars, and even 4K TV: everyone needs semiconductors.
We imagine that you don’t necessarily have time to read all of our previous articles on the state of the chip market. Here, in summary, what is currently happening in this key industrial sector!
Only one thing is essential to understand: little by little, the whole world unites against the chinese superpower. The United States does not hide its animosity towards the Middle Empire and does everything to isolate China, cut it off from all the other main players in the chip industry (Japan, South Korea, Germany, Netherlands. ..). A sort of “Westernized bloc” has formed and the strategy is working: China is taking blow after blow.
In this dynamic, the President of the European Commission Ursula von del Leyen announced in early February 2022 a plan costing 43 billion euros to strengthen the chip industry of the Old Continent. For its part, the United States wishes to devote 52 billion dollars to this same end.
Put like that, these numbers seem relatively close. When you know a little about the subject, you quickly realize that the situation is actually a bit more complex than that. In effect, the USA and Europe do not start at all from the same point! American soil already has a large number of semiconductor factories and some of them are even at the cutting edge of current technologies. We can cite, for example, the Intel factories in Oregon and Arizona, the TSMC factory in Washington or the Samsung factory in Texas. Compared to all this, the European integrated circuit industry looks almost ridiculous.
The path seems clear for the country of Uncle Sam. Unless.
A major and essential trading partner for the United States has just planted them: South Korean manufacturers refuse the commercial conditions imposed by the United States.
Samsung and SK Hynx: South Korea versus the US chip industry
The US$52 billion is not necessarily intended to strengthen American companies, but companies operating on American soil. This little nuance changes everything. Foreign chipmakers are perfectly eligible for their subsidies if they apply for them. The South Koreans at Samsung and SK Hynx have even already taken the necessary measures to take advantage of it!
- Samsung recently invested 17 billion dollars to set up a new plant in the town of Taylor, Texas. Barring surprise setbacks, and there could be one, this factory should be able to spit out its first integrated circuits around the fall of 2024.
- SK Hynx is a much less well-known name than Samsung. Don’t overlook it though: it’s one of the largest manufacturers of memory ICs and CMOS sensors in the world. SK Hynx is expected to build an advanced semiconductor packaging plant in the United States soon. Again, billions are at stake.
These two major investments are extremely important for the US chip industry. They will be valuable in the fight against China. Yes but here it is: there is now a non-zero probability of not seeing these projects succeed.
On March 27, 2023, the United States Department of Commerce detailed the conditions that companies must meet to benefit from the country’s major investment plan in the fight against China. Surprise : all companies that want US billions are obliged to deliver their profitability forecasts (the objective would be to confiscate any excess profits). Samsung and SK Hynx would therefore be forced to give the United States Excel files detailing all the forecast calculations related to the two factories we have just mentioned.
Joe Biden’s government wants to know everything: technical production capacities, production volume classified by type of wafer, selling price… everything. According to newspaper information BusinessKoreaSamsung and SK Hynix would not be willing to accept such conditions, which calls into question their presence on American soil. The two Korean giants would claim that their competitiveness could be strongly affected by this delivery of sensitive information.
At the beginning of April 2023, it’s time for negotiations. Who will eventually give in? The suspense remains.
