In this article, we’ll delve into the latest developments regarding the US government’s CHIPS Act and South Korea’s objections to some of its requirements.
Key takeaways:
South Korean trade minister Ahn Duk-geun has raised issues regarding the CHIPS Act, a US legislation that offers billions in subsidies to promote semiconductor manufacturing in the United States and attract chipmakers.
According to reports, Minister Ahn expressed concerns about the requirement of too much information for applying for funding under the CHIPS Act.
This could be referring to the need for a detailed description of the technology and manufacturing processes to be used in the facility for which incentives are sought, which was outlined in the Notice of Funding Opportunity published on February 28.
Additionally, those applying for CHIPS Act funding must submit a comprehensive financial model that includes projected cash flows, capital expenditures, operating expenses, revenues, taxes, and terminal values, as well as information on internal rates of return, profitability metrics, and scenarios under various macroeconomic, market, and operating conditions.
Minister Ahn has raised concerns that these requirements may force applicants to reveal sensitive technology secrets, and could also provide valuable competitive intelligence through the extensive financial information submitted.
Furthermore, the CHIPS Act mentions profit-sharing, which matters to Samsung and SK Hynix.
Samsung is considering the construction of eleven semiconductor fabs in Texas, while SK Hynix plans to invest $22 billion in the United States.
Neither company is presumably keen to have US officials able to consider their innermost secrets.
Minister Ahn aims to secure guarantees that Samsung and SK Hynix won’t face any danger.
Nevertheless, the US’s semiconductor policies have upset both companies since they restrict their operations in China.
Furthermore, the US may impose limits on the production they can carry out in their Chinese facilities.
Even though China and South Korea have a strong alliance, the US is making extensive demands on its allies to regain its position as the dominant player in semiconductor manufacturing.
Minister Ahn intends to have discussions with officials from the US Commerce Department, the White House, and major think tanks regarding the Chips Act.
The Biden administration requires companies that receive $52.7 billion in available funds from the Chips Act to share excess profits and explain their plans for affordable childcare.
The Chips Act is a significant part of the Biden administration’s initiative to bring semiconductor manufacturing to the United States, which is crucial for maintaining its edge over China in global markets.
However, some of the requirements for obtaining the subsidies pose challenges for South Korean chipmakers Samsung Electronics Co Ltd and SK Hynix Inc as they consider applying for funding.
The South Korean government has warned that the conditions of the Chips Act could increase business uncertainties, violate companies’ management and technology rights, and make the United States a less attractive investment option.
The Chips Act demands that companies receiving incentives share with the US government a portion of their profits that exceed the initial projections by an agreed-upon limit.
This requirement aims to prevent companies from abusing subsidies.
However, it has raised concerns among chipmakers such as Samsung and SK hynix that their confidential information may be at risk.
Furthermore, companies receiving chips subsidies will be prohibited from participating in joint research and technology licensing efforts or expanding semiconductor manufacturing capabilities in foreign countries of concern like China for ten years.
This condition could further limit the operations of Korean companies that have significant investments in China.
The profit-sharing requirement and restrictions on operations have become major points of contention for South Korean chipmakers like Samsung and SK Hynix.
These companies fear that sharing their excess profits with the US government could lead to the disclosure of their trade secrets and proprietary information.
Moreover, the restriction on joint research and technology licensing efforts and expansion of manufacturing capacity in countries like China could limit their growth prospects and put them at a competitive disadvantage.
The South Korean government has warned that these conditions could deepen business uncertainties, violate companies’ management and technology rights, and make the United States less attractive as an investment option.
While the US government aims to ensure that the subsidies are not misused, it needs to balance this goal with the need to maintain good relations with its allies and promote a healthy global technology ecosystem.
The Chips Act plays a critical role in the Biden administration’s efforts to bring semiconductor manufacturing back to the United States and ensure US dominance in the global semiconductor market.
The act proposes tens of billions of dollars in subsidies for semiconductor manufacturing on US soil, which could help attract investment and promote innovation in the industry.
However, the success of the Chips Act depends on its ability to navigate the complex web of economic and political interests that shape the semiconductor industry.
The US government needs to ensure that its policies do not have unintended consequences for its allies or harm the global technology ecosystem.
The US government’s CHIPS Act has become a contentious issue for South Korean chipmakers like Samsung and SK Hynix.
While the act proposes significant subsidies for semiconductor manufacturing in the United States, its conditions, such as profit-sharing requirements and restrictions on operations, have raised concerns among these companies.
The South Korean government has warned that these conditions could deepen business uncertainties and violate companies’ management and technology rights.
The Biden administration must balance its goal of promoting domestic semiconductor manufacturing with the need to maintain good relations with its allies and promote a healthy global technology ecosystem.
As the US government continues to push forward with its plans for the semiconductor industry, it must ensure that its policies do not have unintended consequences for its allies or harm the global technology ecosystem.
