(ATTN: ADD SK hynix’s answer at the bottom)
By Woo Jae-yeon
SEOUL, March 02 (Yonhap) — Washington’s Chips Act and its requirements for incentivized companies are likely to test South Korean chipmakers’ ability to manage trade uncertainties and the balance between the United States and China.
The Biden administration on Tuesday announced terms for grants under the $53 billion law, designed to revitalize the U.S. chip industry, secure supply chains and control China’s technological advances.
Washington has reaffirmed that it will not tolerate any recipient of federal money expanding its semiconductor business in China and potentially helping one of the largest chip markets gain easier access to cutting-edge chip technology.
“First and foremost, the law and science of chips is about national security…Making more chips here at home will help secure our national security future for decades to come,” Wednesday wrote. Commerce Secretary Gina Raimondo on Twitter.
The law requires that “successful applicants agree not to engage in any material transaction involving the material expansion of semiconductor manufacturing capacity in any relevant foreign country during the 10-year period commencing on the date of ‘attribution’.
In the event of a violation, applicants will be required to return the full amount of an award, the department said, adding that it plans to release detailed guidelines on national security guardrails soon.
Samsung Electronics Co. and SK hynix Inc., the world’s two largest memory chip makers, have significant semiconductor manufacturing operations in China, with Samsung producing around 40% of its NAND flash memory and SK hynix manufacturing around half of its global DRAM chips in China. .
In the United States, Samsung is building a $17 billion chip factory in Taylor, Texas, and SK Hynix said it plans to select a site for a semiconductor packaging plant there during the first semester.
Being caught between the growing technological rivalry between the United States and China is nothing new for the two chipmakers.
Last October, Washington announced a set of measures that restrict exports of advanced semiconductor manufacturing equipment to companies in China.
The sweeping export restrictions, among other things, require companies to receive a license for equipment exports to Chinese companies that manufacture advanced chips, such as DRAM chips of 18 nanometers and below, NAND flash chips with 128 layers or more and logic chips of 14 nm and less. .
Both companies received a one-year waiver from the US government through close consultation and discussion with Washington.
The export restrictions and Tuesday’s announcement of the conditions for granting the Chipset Law are two different things, but they’re mostly seen by Korean companies as a move to slow down China’s technological and military progress. .
Another condition that is rocking South Korea, the law requires companies to share part of their profits and limits share buybacks and dividends.
Recipients of more than $150 million in direct funding will be required “to share with the U.S. government a portion of any cash flow or return that exceeds the applicant’s projections above an established threshold,” according to the Department of Finance. Trade. .
“In granting the funding, we will put a number of safeguards in place to ensure that the companies that receive funding hold their end of the bargain,” Raimondo reportedly said during a press briefing. “We don’t write blank cheques.
South Korea’s Ministry of Commerce, Industry and Energy said on Wednesday it would continue to consult closely with the US government to relay the concerns and positions of South Korean chipmakers on the issue.
Greg Roh, head of technology research at HMC Investment & Securities, expected the security guardrails to negatively impact the Chinese operations of Samsung and SK hynix.
“I think it will be more difficult for them to upgrade their Chinese factories (to advance Node chips in the future),” he said.
The Chips Act creates “great uncertainty” about the future of Korean chipmakers, Meritz Securities analyst Kim Sun-woo wrote in his recent report, putting them in a position to share sensitive technology and trade with Washington. in order to obtain grants. And their business strategy in China could also be fraught with pitfalls.
“As there is a strong possibility that investment in China will be limited in the future, Samsung and SK hynix may have to decide whether to maintain operations there and even consider an exit strategy,” he said. declared. declared.
Samsung said, “We are reviewing the terms outlined in the notice.”
“We are currently reviewing the matter,” SK Hynix said.
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