Addressing the chip dilemma

Home > Opinion > Columns

print dictionary print

Addressing the chip dilemma

Kim Yong-suk

The author is a professor of electronic engineering at SungKyunKwan University and vice president of the Institute of Semiconductor Engineers.

In the U.S.-China competition over semiconductors, the U.S. mainly has two plans. One is to legislate an act to promote its semiconductor industry and the other is to establish some kind of supply chain alliance, which the Korean media is calling Chip 4. You can accurately understand America’s intention when the two are considered together.

The purpose of the chip industry promotion act is to build enough semiconductor factories in the states to establish a manufacturing capacity. Attracting semiconductor companies from Korea and Taiwan will be of great help to America.

The Chip 4 alliance could be a consultative body in which the U.S. stands at the center and leads the supply chain until the chip manufacturing base is settled in the U.S. As there are no specifics for it yet, related countries are expected to individually discuss ideas with the U.S. at the government level in the future.

On August 9, the U.S. finalized the semiconductor industry promotion legislation, the Chips and Science Act. If you look into the bill, $52 billion in subsidies will be allocated to the semiconductor industry — $39 billion for building semiconductor facilities and $11 billion for research and building a strong workforce. Foreign companies building semiconductor factories in America will get 25 percent tax exemptions. Samsung Electronics and SK Hynix of Korea and TSMC and UMC of Taiwan are among the beneficiaries.

But there is a problematic clause. The companies that receive the U.S. government subsidies are prohibited from expanding or constructing new high-tech semiconductor factories in China for 10 years. Any violation will result in a full refund of the subsidy.

Companies receiving U.S. subsidies are banned from making new investments in China in advanced technologies of less than 28 nanometers in foundries for the next 10 years. This applies to TSMC and UMC’s local operations in China. As TSMC operates a 12-inch wafer foundry with a 16-nanometer process in Nanjing, China, that can be affected immediately. Because American companies Intel and Micron also have testing and packaging factories in Chengdu and Xian respectively, they will be affected, too.

The U.S. Department of Commerce is preparing separate standards for regulations on investments in China for memory chips and packaging by Korean companies. Depending on the details of the regulations, Korean companies could take a greater hit than Taiwanese companies given the relatively large share of memory chips produced by Samsung and SK Hynix in China.

Samsung has operated a NAND flash plant in Xian and a post-processing plant for testing and packaging in Suzhou since 2014. They produce 15 percent of global NAND flash production, which accounts for 40 percent of Samsung’s production. SK Hynix has been producing 15 percent of global DRAM production in Wuxi, which accounts for 50 percent of its production, since 2006. Intel’s NAND factory is located in Dalian. Its post-processing plant is located in Chongqing. Samsung Electronics and SK Hynix factories are closely intertwined from semiconductor materials to production to post-processing. Until recently, additional investments continued to expand facilities and replace old equipment.

If the high-tech equipment of Korean chip factories in China is not replaced constantly, it will be harder to increase yields. In the end, they can only produce low-end products, leading to a loss of their competitive edge. This is the same as demanding the shutting down of Korean chip factories in China. That’s not a simple business matter as U.S. finished product makers such as Apple, HP and Dell rely on those chips.

Korea’s participation in any Chip 4-type alliance seems unavoidable. Korean companies contribute to global industrial development through chip design and manufacturing with America’s proprietary technologies, and China also benefits from them. China must not oppose Korea’s Chip 4 participation by using its market as a weapon. Following the same logic, America must not oppose Korea’s expansion and new investments in chip factories in China. Outstanding technologies contribute to the world through industrial development.

The Korean government’s role is very important here. In preliminary meetings for any Chip 4-type alliance, it must stress the seriousness of this matter to the U.S. and find effective solutions. The dilemma can be solved if all parties demonstrate a collaborative spirit.
Translation by the Korea JoongAng Daily staff.
Log in to Twitter or Facebook account to connect
with the Korea JoongAng Daily
help-image Social comment?
lock icon

To write comments, please log in to one of the accounts.

Standards Board Policy (0/250자)