The ongoing chip war between the U.S. and China is expected to have an impact on the Korean economy as a whole. [Photo by MK DB]
Executives at Samsung Electronics Co. and SK hynix Inc., the world’s two largest memory chip suppliers, visited the U.S. recently to request for a waiver from its chip rules on China, according to sources on Monday.
The companies are hoping to receive waiver from the rule or be given a similar grace period by the U.S. as was the case in October last year when it allowed the Korean companies to be freed for a year from chip equipment export control measures.
The executives flew to the U.S. for urgent discussions related to the U.S. government’s export control on China. The Korean government is also known to have offered support.
The discussions involved follow-up measures related to the U.S. CHIPS and Science Act that was approved by Congress and signed by President Joe Biden in July last year.
The act includes a guardrail provision that bans a corporate entity receiving U.S. subsidiary and tax credits in chip investment from engaging in advanced chip facility investment, or “material expansion of semiconductor manufacturing” in China or any other foreign country of concern for 10 years.
Under the provision, if Samsung Electronics and SK hynix receive subsidies from the U.S. government, they will be restricted from carrying out additional investments in China for the next 10 years.
Samsung Electronics‘ factory in Xi’an, China [Image source: Samsung Electronics]
Samsung Electronics operates a foundry plant in Austin, Texas and is building a new plant in Taylor. Foreign media reports have noted that Samsung Electronics plans to build 11 new chip factories in Texas over the next 20 years.
SK hynix also plans to spend $15 billion in advanced packaging manufacturing and chip-related research and development in the U.S. and plans to pick a location for an advanced packaging factory this year. The factory will begin mass production between 2025 and 2026, reports say, and create 1,000 jobs.
Samsung Electronics also runs factories in Xi’an and Suzhou in China and SK hynix in Wuxi and Dalian. SK hynix relied 29.2 percent of its entire sales on China in the third quarter of last year. China sales at Samsung Electronics also accounts for more than 30 percent of its entire revenue.
The ongoing chip war between the U.S. and China is expected to have an impact on the Korean economy as a whole. Chips are Korea’s largest export item that account for one-fifth of its entire outbound shipments.
According to data from the Ministry of Trade, Industry and Energy, Korea’s chip exports reached $6 billion in January, down 44.5 percent from the same period a year ago, due to weak demand from China. Chip exports to China fell 35.6 percent in November last year, 36.8 percent in December and 46.6 percent in January.
By Choi Seung-jin, Oh Chan-jong, Lee Sae-ha, and Lee Eun-joo
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]