The U.S. government’s CHIPS and Science Act encourages semiconductor companies to invest in new fabs in the U.S. Still, South Korean chipmakers want to change the stringent conditions attached to the funding. A Business Korea report indicates that Korean firms are uneasy about disclosing sensitive information related to fab capacity and expected yields, among other things, which they view as a risk to their trade secrets and proprietary technology. Essentially, they believe that these requirements could endanger their intellectual property.
The U.S. Department of Commerce has set rigorous requirements for semiconductor companies seeking subsidies, as they must provide extensive information on multiple aspects of their operations. It includes detailed projections on fab production capacity for different types, expected wafer yield, utilization rates, and initial selling prices. Moreover, applicants must estimate production volumes annually, along with projected price changes. To demonstrate the accuracy of their calculations, companies must provide profitability indicators, such as projected cash flows, in Excel format. The application process is thorough and requires substantial production and financial performance data.
Although the U.S. Department of Commerce assures semiconductor companies that their trade secrets will not be disclosed, South Korean firms are still concerned about potential risks.
Leaking essential trade secrets to U.S. firms such as Intel could cause significant harm to companies like Samsung Electronics and S.K. Hynix. Moreover, due to regulations on semiconductor investments in China, labor union obligations, and the sharing of excess profits, Korean firms may not receive any advantages from the U.S. government’s subsidy programs and may even suffer losses.
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As a result, these factors could potentially result in Korean firms losing more than they stand to gain. In conclusion, while the U.S. government has assured the security of sensitive information, South Korean semiconductor companies have valid reasons to be apprehensive about the potential drawbacks of the subsidy programs, given the possibility of exposure of trade secrets and existing limitations to impact their profitability.
The report suggests that Korean semiconductor companies eligible for subsidies are hesitant to apply due to their concerns about trade secret exposure and the possibility of experiencing financial losses. Although South Korean companies have concerns about the strict demands imposed by the U.S. government for the CHIPS Act subsidies, industry experts think that these firms may still have to apply for the subsidies due to increasing investment requirements driven by rising inflation and commodity prices.
The relationship between South Korea and the United States may also play a role in their decision-making process. To summarize, while Korean semiconductor companies are hesitant about the potential risks associated with the U.S. government’s subsidy programs, economic factors, and geopolitical considerations may leave them with little choice but to apply for financial assistance despite the risks involved.
Samsung Foundry is constructing a new fabrication facility that can use EUV technology in Taylor, Texas, with an initial investment plan of $17 billion. However, the project’s total investment requirements may rise due to increasing costs and inflation. The facility is anticipated to begin chip production using Samsung’s 3nm and 4nm-class nodes in the latter half of 2024. Samsung is also considering constructing a massive fab complex that could require an investment of as much as $192 billion. However, it needs to be made clear whether the company has made any formal decisions regarding this investment.
S.K. Hynix has not made any immediate plans to establish a memory production facility in the United States but is contemplating building a packaging plant eligible for CHIPS subsidies. While the U.S. government’s demands for data from semiconductor companies seeking subsidies are strict, Kyung Hee-Kwon, an associate researcher at the Korea Institute of Industrial Economics, notes that the United States is the birthplace of semiconductor technologies such as extreme ultraviolet lithography equipment.
He also stresses that Samsung Electronics needs high-tech U.S. industries and skilled American workers to expand into the non-memory sector. Therefore, Hee-Kwon predicts that Samsung Electronics will likely apply for semiconductor subsidies, despite concerns about trade secrets.