"South Korean Semiconductors to Face Limits on China's Production Technology Level"... US Subsidy Benefits in Focus

US Commerce Secretary "Welcomes Korean Companies' Subsidy Applications" Mentioned
But on the Same Day "Likely to Set Limits When China Semiconductor Export Restriction Waiver Ends"

The U.S. administration under Joe Biden is set to begin the process of distributing $39 billion (approximately 50 trillion won) in subsidies aimed at promoting domestic semiconductor production. Gina Raimondo, U.S. Secretary of Commerce and head of the Biden administration's semiconductor policy, stated, "We are in close talks with South Korea," and welcomed applications for subsidies from Korean companies that build factories and conduct business in the United States.

Despite the news of U.S. subsidy support, the domestic semiconductor industry is not easily smiling. This is because companies receiving U.S. subsidies are subject to conditions that prohibit expanding semiconductor production capacity beyond a certain level in China, meaning that Samsung Electronics and SK Hynix, which operate semiconductor factories in China, need to closely examine whether they can qualify for the subsidies. Already, a senior U.S. government official has revealed that due to export restrictions on semiconductors to China, limits will be set to prevent Samsung Electronics and SK Hynix from producing semiconductors above a certain technological level at their Chinese factories.

[Image source=AP Yonhap News]

◆ "Securing at Least Two Semiconductor Clusters by 2030"

According to the Wall Street Journal (WSJ) and others on the 23rd (local time), Secretary Raimondo said in a lecture at George Washington University in Washington, D.C., "Starting next Tuesday (the 28th), we will begin accepting applications for semiconductor support law subsidies," adding, "The purpose of the subsidies is to incentivize companies to produce semiconductors in the U.S." She described the semiconductor support law as "fundamentally a national security policy" and said, "I want the U.S. to be the only country where all cutting-edge semiconductor manufacturers have substantial R&D and large-scale manufacturing facilities."

Last August, the U.S. allocated a total budget of $52.7 billion over five years through the Semiconductor Support Act to encourage semiconductor companies to invest in the U.S., including $39 billion in semiconductor production subsidies and $13.2 billion in research and development (R&D) grants. The subsidies mentioned by Secretary Raimondo refer to the $39 billion in support for building semiconductor production facilities in the U.S. Applications for R&D grants are expected to open within a few months.

Secretary Raimondo announced plans to secure at least two semiconductor clusters by 2030. She emphasized that each cluster would establish a robust supply ecosystem and R&D facilities to foster new technological innovations. She also stated that semiconductor fabs would produce advanced memory semiconductors at economically competitive levels while simultaneously meeting demand for mature process semiconductors primarily used in automobiles, medical devices, and military equipment.

Gina Raimondo, U.S. Secretary of Commerce
[Photo by EPA Yonhap News]

WSJ reported that although Secretary Raimondo did not disclose the locations of the clusters, Arizona and Ohio?where U.S. Intel and Taiwan's TSMC are investing in semiconductor factories?and Texas, where Samsung Electronics is investing in semiconductors, are considered likely candidates.

◆ "Exploring Cooperation with Countries like South Korea... Welcoming Korean Companies"

During a Q&A session, when concerns were raised that U.S. domestic-focused policies might economically harm East Asian allies such as South Korea, Japan, and Taiwan, Secretary Raimondo clarified that the U.S. does not seek subsidy competition nor complete self-sufficiency in semiconductors.

She said she recently contacted Japan and is in close talks with her counterparts in South Korea, emphasizing that the U.S. will rely on allies for semiconductor production for a long time to come. She added that discussions are ongoing to find ways to collaborate with South Korea, Europe, and Japan, stating, "If Japanese or Korean companies build factories and conduct business in the U.S., they are welcome to apply for subsidies." During the lecture, she also mentioned, "Everyone wants to know how much Intel and Samsung are receiving," and referred to Samsung as "a global leader in this field."

The domestic semiconductor industry is paying close attention to the subsidy conditions. The U.S. requires companies receiving subsidies to enter into agreements with the Department of Commerce not to expand semiconductor production capacity in China or other countries of concern for the next ten years. This is a guardrail provision designed to prevent China from benefiting from U.S. subsidies. Given that Samsung Electronics and SK Hynix operate semiconductor factories in China, the detailed requirements are crucial.

[Image source=Reuters Yonhap News]

The U.S. has stated that it will not restrict the operation of existing facilities producing legacy (mature process) semiconductors in China. However, if production capacity for legacy semiconductors is expanded, most of the output must be for the Chinese domestic market. The Semiconductor Support Act defines legacy semiconductors for logic (non-memory) chips as those at 28nm (nanometers; 1nm is one-billionth of a meter) or earlier generations. However, it does not specify details for memory semiconductors, instead stipulating that the Secretary of Commerce, in consultation with the Secretary of Defense and the Director of National Intelligence, will determine the level equivalent to logic semiconductors.

Previously, in October last year, the U.S. Department of Commerce imposed export restrictions on semiconductor exports to China, requiring U.S. companies to obtain licenses to sell equipment and technology capable of producing logic chips using FinFET technology at 16nm or 14nm and below, DRAM at 18nm or below, and NAND flash with 128 layers or more, effectively banning such exports.

◆ U.S. Official: "Limits on Semiconductor Production Levels for Samsung and SK in China"

Domestic semiconductor companies operating factories in China are expected to face additional impacts from U.S. export restrictions on semiconductors to China. Earlier, the Department of Commerce announced export control measures prohibiting the export of U.S.-made semiconductor equipment to companies producing semiconductors in China but granted Samsung and SK Hynix a one-year comprehensive exemption for equipment imports to their Chinese factories.

On the same day as Secretary Raimondo's announcement, a senior U.S. government official mentioned that Samsung Electronics and SK Hynix, which are under a one-year grace period for export restrictions on semiconductors to China, might face certain limits on the level of semiconductors produced at their Chinese factories.

[Image source=Reuters Yonhap News]

Alan Estevez, U.S. Deputy Under Secretary for Industry and Security at the Department of Commerce, said at the Korea Foundation (KF) and Center for Strategic and International Studies (CSIS) Korea-U.S. Economic Security Forum held in Washington, D.C., in response to a question about what happens after the grace period ends, "We are consulting with companies on how to proceed. It is highly likely that there will be a cap on the level of semiconductors companies can produce." He explained, "If companies are currently producing a certain generation of NAND flash, they will be stopped at some level within that range."

This is interpreted as an effort to limit the technological level of semiconductors produced in China to prevent China from acquiring advanced semiconductors from factories operated by Samsung Electronics, SK Hynix, and others in China.

Deputy Under Secretary Estevez stated, "(How much will be allowed) depends on how China behaves, but we are having in-depth discussions with Korean companies." He added, "In the process of preventing China from building capabilities that threaten us, we do not want to harm our allied companies," and said, "We are continuing talks with South Korea on this matter."

This content was produced with the assistance of AI translation services.