“What about Chinese factories and trade secrets?” Beginning to apply for subsidies in the US, Samsung and SK with haircuts

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Application for investment subsidies for semiconductor production facilities in the United States has begun. However, Samsung Electronics (005930) and SK Hynix (000660) are still struggling. The conditions are difficult to blindly apply for the subsidy, and it is burdensome to refuse to receive it.

At least SK Hynix, whose application period still remains, can afford to take stock of the situation, but Samsung Electronics, which is already constructing a factory, is in a hurry. The remaining key is persuasion. Governments and semiconductor companies are expected to negotiate to lower the requirements of the US government.

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On the 31st (local time), the US Department of Commerce began accepting grant applications for state-of-the-art semiconductor manufacturing facilities. Legacy (maturity process) or post-process manufacturing facilities can apply from June 26th.

When semiconductor companies apply for subsidies, the U.S. Department of Commerce will comprehensively review the economy and national security, as well as financial status, investment capabilities, and workforce plans.

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The problem is that in order to receive subsidies, strict conditions must be met. If subsidies are received, expansion of semiconductor production facilities in countries of concern, such as China, is restricted for 10 years from the date of receipt. In the case of advanced semiconductors, they are restricted from expanding their production capacity by more than 5% (10% for legacy semiconductors) within 10 years.

The Wall Street Journal (WSJ) analyzed that the guardrail regulations would put a burden on Korea’s Samsung Electronics and SK Hynix and Taiwan’s TSMC, which operate factories in China.

In addition, profitability indicators such as expected cash flow and yield of companies must be submitted as an Excel file, and a certain portion must be returned in case of excess profit. In fact, the view of the industry is that it is a request to disclose the trade secrets of semiconductor companies.

Semiconductor companies are in a difficult situation. At least SK Hynix, whose application deadline starts in June, has room to spare, but Samsung Electronics is in a hurry.

Samsung Electronics Semiconductor Plant Construction Site in Taylor City, TexasSamsung Electronics Semiconductor Plant Construction Site in Taylor City, Texas

Currently, Samsung Electronics is building a $17 billion state-of-the-art semiconductor manufacturing plant in Taylor, Texas. Last year, it also announced plans to invest in a semiconductor manufacturing plant worth $200 billion.

Applying for subsidies not only restricts business in China, but also raises concerns about exposure of trade secrets. In response, Samsung Electronics is only repeating a cautious response, saying, “We plan to closely review the situation and establish a response direction.”

On the other hand, SK Hynix, which is promoting the construction of a memory packaging (back-end process) plant, has relatively little time as the application period begins on June 26th.

Nevertheless, SK Hynix Vice Chairman Park Jung-ho met with reporters at a recent shareholders’ meeting and expressed frustration, saying, “I am considering whether to apply for a US semiconductor subsidy.”

Companies are pinning their hopes on persuading the US government further. If Samsung Electronics or TSMC does not apply for subsidies under difficult conditions, it is necessary to actively highlight the fact that the US government’s semiconductor support law itself can become useless and obtain additional relief.

TSMC Chairman Liu De-yin said at a conference hosted by the Taiwan Semiconductor Industry Association on the 30th (local time) that “there are some unacceptable conditions” regarding US semiconductor subsidies. We will talk to the US government,” he said.

President Yoon Seok-yeol also met with U.S. Trade Representative Catherine Thai on the 30th and asked for conditions to be eased, saying, “There are concerns among Korean companies about providing excessive levels of information.”

Source: Donga

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