Europe and the United States have taken a similar step to strengthen its semiconductor industry and reduce its current dependence on Asia. At the beginning of February 2022 Ursula von der Leyen, the president of the European Commission, announced that the Old Continent will allocate 43,000 million euros to its chip industry (this figure includes both public and private investment). The United States, for its part, approved the ‘Chips and Science Act’ program in July 2022, which plans to dedicate 52,000 million dollars to this same purpose.
His starting point, however, is very different. The United States has a large number of semiconductor factories, and some of them, such as those owned by Intel in Oregon or Arizona, the one owned by TSMC in Washington or the one owned by Samsung in Texas, are state-of-the-art. The European integrated circuit industry is much less developed, so it is clear that it has a long way to go to reach its goal: manufacturing 20% of the chips that will be produced worldwide by 2030.
The United States also has in its favor the fact that Intel, TSMC and Samsung are some of the companies that are already building new state-of-the-art semiconductor plants within its borders. It is evident that the Administration led by Joe Biden has an ambitious plan in hand, but he has just stumbled upon a problem that complicates his outlook, and one that he surely did not count on: South Korean semiconductor manufacturers do not seem to be willing to accept his conditions. They consider them abusive.
Samsung and SK Hynix, on the warpath
The strategy that the United States is implementing to strengthen its semiconductor industry seeks to attract investment and develop the business fabric within its borders. However, the money that the ‘Chips and Science Act’ program has mobilized is not destined only to American companies; foreign companies in the chip sector can also participate in this initiative. In fact, some, such as South Korea’s Samsung and SK Hynix, have already taken the necessary steps to do so.
The companies that participate in the ‘Chips and Science Act’ program must previously deliver their profitability forecast
Samsung has invested 17,000 million dollars in the development of a state-of-the-art semiconductor plant that is already being built in Taylor (Texas). If all goes well, it will be able to start manufacturing chips by the end of 2024. And SK Hynix, which is one of the largest manufacturers of memory ICs and CMOS sensors on the planet, plans to build an advanced semiconductor packaging plant in the United States. A priori, these two companies meet the requirements stipulated by the US Government to be able to access financial support that proposes the program ‘Chips and Science Act’.
However, and here comes an unexpected turn of events, it is possible that neither Samsung nor SK Hynix will finally join this plan. On March 27, the United States Department of Commerce detailed the conditions that must be met by companies that want to take advantage of this program, and one of these clauses requires them to deliver their profitability forecast with the purpose of confiscating excess profits if they finally came to occur. In addition, these companies have to deliver the Excel sheets that detail their calculations so that the Administration can check beforehand if they are done correctly.
However, this is not all. Another of the conditions imposed by the US Government forces companies to communicate what manufacturing capacity their plants have, categorized by type of wafer, annual production volume or sale price during the first year of manufacture, among other variables. According to the newspaper BusinessKorea Samsung and SK Hynix are not willing to accept these conditions. These South Korean companies argue that if they provide all the information requested by the Administration, their competitiveness could be affected, and US companies would have the opportunity to take advantage of this circumstance. They have to negotiate. We’ll see who finally gives in.
Cover image: TSMC
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