"Limitations of Growing Domestic Semiconductor Industry Solely with US Subsidies"

There is an analysis that the large-scale subsidies provided by the U.S. government to the semiconductor industry alone have limitations in growing the domestic industry.

On the 2nd (local time), the U.S. Wall Street Journal (WSJ) forecasted this as the subsidy payments under the U.S. CHIPS Act are entering their final stages, citing rapid growth of competing countries, limits on subsidy amounts, and high semiconductor manufacturing costs.

Enacted in 2022, the U.S. CHIPS Act provides a total of $52.7 billion (approximately 73 trillion KRW) over five years, including $39 billion in semiconductor production subsidies for companies building factories domestically and $13.2 billion in research and development (R&D) support. The subsidies were mainly allocated to major companies such as Intel, Samsung Electronics, TSMC, and Micron, which announced semiconductor production plans in the U.S.

According to Boston Consulting Group, the U.S. semiconductor program is expected to triple semiconductor production volume in the U.S. by 2032. However, the U.S. global market share is projected to increase only slightly from 12% in 2020 to about 14% in 2032.

This is due to intensified global competition surrounding semiconductor production, with competing countries also increasing investments. South Korea, Taiwan, Japan, China, and European countries are also boosting investments in the semiconductor industry to maintain their competitiveness.

WSJ pointed out that it is unclear whether the industry receiving U.S. semiconductor subsidies will fully implement their factory construction plans. This is because the cost of building new semiconductor factories is high. For example, activist fund Elliott invested $2.5 billion in Texas Instruments (TI), an analog semiconductor manufacturer, and requested the management to delay new manufacturing expenditures to improve cash flow. TI is one of the companies expected to benefit from subsidies under the CHIPS Act.

There are even companies excluded from subsidy payments. U.S. semiconductor manufacturer SkyWater Technology is a representative case. The company announced an $1.8 billion research and production facility construction plan in Indiana in 2022 but recently abruptly canceled it. Industry insiders speculated that this was due to being excluded from government subsidies. WSJ also reported that semiconductor display equipment maker Applied Materials may disperse the $4 billion research center it planned to build across multiple locations or build it outside the U.S.

There is also an opinion that the impact of subsidies will be limited due to the extremely high costs of semiconductor factory manufacturing. Building a single advanced semiconductor manufacturing plant requires more than $20 billion (approximately 28 trillion KRW). Additionally, even if these plants are currently planned for construction, they will not be operational until the late 2020s.

Within the industry, there is an opinion that tax reductions for semiconductor manufacturing equipment purchases may be more effective if the U.S. government does not provide additional subsidies. The CHIPS Act already includes a 25% tax credit benefit for equipment purchases, but it will expire in 2026. The semiconductor industry is preparing lobbying efforts to extend this benefit.

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