‘The 2nd IRA Act’… Choosing K Semiconductor
“Excessive management intervention under the pretext of subsidies”
U.S. emphasizes separation from China in favor of national security
Unable to expand facilities in China for 10 years
Samsung to submit letter of intent by this month
‘Re-election’ Biden desperately needs global investment
Negotiation key, such as 25% investment tax credit
In a speech given in Virginia Beach, Virginia on the 28th (local time), US President Joe Biden is explaining the outline of the New Year’s budget plan scheduled for the 9th. President Biden said, “I want to be clear. Billionaires should pay more taxes (to win strategic competition with China),” he said, adding that he would also strengthen support for health insurance programs for the low-income class. Virginia Beach AFP Yonhap News
When the US Department of Commerce disclosed the ‘subsidy support plan under the Semiconductor Support Act’, the Korean semiconductor industry experienced a mix of embarrassment and a sense of crisis. Considering the ‘toxin clause’ attached to subsidy beneficiaries, such as preferential supply of advanced semiconductors in the field of defense and security, mandatory semiconductor technology cooperation with the United States, and redemption of excess profits, the risk of leakage of advanced semiconductor technology and the possibility of infringement of management autonomy because it is large. In particular, the calculation method has become more complicated for Korean companies caught between the US and China in the competition for supremacy in semiconductors.
On the 1st, the domestic semiconductor industry showed the greatest resistance to the requirements of ‘priority supply of state-of-the-art semiconductors in the field of defense and security’ and ‘applicant (company) willing to provide semiconductor facilities to the US government’ among the subsidy payment screening criteria. An industry insider said, “It seems that the US is trying to intervene too much in management under the pretext of subsidies. pointed out. In addition, there is a possibility that the U.S. government’s intervention in management may also be required to supply high-tech semiconductors for military and security purposes first, regardless of the company’s main products.
In fact, the U.S. Department of Commerce said, “Semiconductors are a very important component of the modern defense system, and secure design and stable supply are essential for national security.” The screening criteria that will consider how much production is released have been revealed. “The U.S. government seeks applicants who are willing to provide semiconductor facilities for use in testing, conversion, production, and potential integration with national security programs,” it said.
In effect, it emphasized US security and made it clear that it would give subsidies to global companies that cooperate in decoupling (separation) from China. This is why there are evaluations that the bill to contain China, just like the Inflation Reduction Act (IRA), might lead to damage to Korean companies.
Samsung Electronics, which is building a foundry (consignment production) plant worth 17 billion dollars (regarding 22.5 trillion won) in Taylor, Texas, and SK Hynix, which announced plans to build a group-level semiconductor R&D facility in Silicon Valley, Although he showed a cautious stance, saying, “Analysis of the details of the Ministry of Commerce is first,” it is said that he has entered into a detailed negotiation strategy.
Companies that build state-of-the-art semiconductor facilities in the US, such as Samsung Electronics, do not have much time because they have to submit an ‘advance statement’ from this day to March 31 and the main application right following. Particularly, the subsidy beneficiaries have a busy road ahead as the detailed standards of the toxic clause, which states that they must not increase semiconductor production facilities in concerned countries such as China for 10 years or conduct joint research with concerned countries, are expected to be released at the earliest in the middle of this month.
Companies building other semiconductor factories or R&D facilities, such as SK Hynix, will be receiving applications from June. The size of the subsidy ranges from 5% to 15% of the total facility investment, with an upper limit of 35%.
If the stringent subsidy regulations unveiled on the day completely block the expansion of semiconductor production facilities in China for 10 years, the possibility that Korean companies will give up subsidy applications cannot be ruled out. Apart from the federal government, the board of directors of the Taylor Independent School District in Texas approved some of the tax reduction programs (Chapter 313) that Samsung Electronics applied for in December of last year according to its long-term investment plan, and decided on tax reductions worth $4.8 billion, and corporate incentive programs A new establishment is also in the works.
On the other hand, there are opinions that subsidy is not given only when all the conditions presented by the US Department of Commerce are met, but that subsidies corresponding to it can be received even if only some of the conditions are met, so first sit down at the negotiating table with the US Department of Commerce and make a specific deal.
In particular, in Washington DC, if Samsung Electronics and Taiwan’s TSMC do not apply for US subsidies, there will be a major setback in US President Joe Biden’s semiconductor supply chain plan, so the negotiation power of these global companies is by no means weak. The Semiconductor Support Act, along with the IRA and the Infrastructure Investment Act, is the biggest achievement of President Biden seeking re-election. An official from the local industry said, “We should also keep an eye on the detailed guidelines of the ‘25% Investment Tax Credit’ (ITC) to be issued by the US Treasury in the future.” said.
Correspondent Gyeongju Lee in Washington, Correspondent Seongguk Park in Seoul
