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South Korea’s semiconductor chip makers are struggling as the U.S. handed out incentives worth about $53 billion (Rp 781 trillion). South Korean manufacturers Samsung Electronics and SK Hynix are worried about losing China as a trade and trading partner.
Currently, the United States (US) is developing chip manufacturing in South Korea, fearing that China will overtake its role in the global supply chain.
obtained from StarSouth Korea wants to maintain a balance between its two major trading partners. Manufacturers Samsung Electronics and SK Hynix chose to avoid a geopolitical conflict that could harm business interests.
Pressure from Washington is expected to increase after U.S. President Joe Biden signed into law the Chip and Science Act on Tuesday (September 8).
The passage of the law boosted Washington’s efforts to form the Chip4 coalition, a partnership that includes South Korea, Taiwan and Japan. Beijing sees the alliance as a U.S. government conspiracy to keep China out of the global semiconductor supply chain.
Gary Ng, senior economist at Asia-Pacific investment bank Natixis, said that if Samsung and SK Hynix tapped Washington’s funds, it would affect the two companies’ expansion in China.
By receiving U.S. aid, subsidy recipients are prevented from scaling up production outside of “old semiconductors” (defined as chips with 28-nanometer process technology or above) for 10 years. .
The U.S. government has the power to decide which devices will be classified as legacy devices in the memory chip market, of which Samsung and SK Hynix are two of the world’s largest manufacturers.
However, Samsung and SK Hynix have invested heavily in building and operating chip foundries in mainland China. Therefore, neither company is likely to give up assets and business interests in the world’s second-largest economy.
South Korea is under more pressure than Taiwan, said Arisa Liu, a senior semiconductor researcher at the Taiwan Institute of Economic Research. This is based on the fact that Samsung has invested $25.8 billion in China since 2012.
Samsung’s two factories in Xi’an account for 42% of the company’s total NAND flash memory (chip) capacity.
“If the two big manufacturers in China can no longer use (more advanced chip making) processes, they may gradually lose their competitive edge,” Liu said.
Meanwhile, SK hynix has a factory in Wuxi, which accounts for 45% of the company’s total dynamic random access memory (DRAM) production capacity.
Keeping China’s manufacturing operations relevant to the global semiconductor industry reflects how Seoul’s government is navigating choppy diplomatic waters between China and the United States.
Representatives from China and South Korea met in Qingdao on the same day the U.S. “Chip and Science Act” was passed to strengthen ties amid geopolitical tensions and stable supply chains.
Criticizing the new U.S. law, Chinese Foreign Minister Wang Yi said China opposes the politicization of the economy and arms trade.
Earlier, South Korean President Yoon Si-yeol tried to placate the country into joining the US-led Chip 4 alliance, pledging to prioritise national interests when deciding on Seoul’s actions.
“Relevant government agencies will study and discuss the matter to protect national interests,” Yin said.
However, both Samsung and SK Hynix have hedged their plans for large-scale new semiconductor manufacturing in the United States.
In July, Biden praised SK Hynix’s parent company SK Group’s plans to invest $22 billion in semiconductor, green energy and bioscience projects in the United States.
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