[Editorial] Semiconductor summit

President Yoon Suk Yeol must deal with the nuclear threats from North Korea and establish a reliable security cooperation system in his state visit to the United States next month. But economic challenges are as important. He must find safety mechanisms for Korean chipmakers to weather the thorny clauses in the U.S. CHIPs and Science Act by effectively persuading U.S. President Joe Biden.

Based on the $39 billion subsidy for foreign chipmakers investing in the U.S., the Chips Act is crammed with poisonous clauses that demand foreign companies, including Samsung Electronics and SK hynix, share their surplus profit with the U.S. and also ban them from investing in their chip facilities in China for 10 years. The law even forces Korean chipmakers to participate in U.S. government-led R&D programs, which borders on disclosing the details of their technology.

All countries put top priority on safeguarding their technological leverage to protect national interest. But the Chips Act has many problems as it contains chauvinistic articles detrimental enough to shake the foundation of the so-called “value-based alliance” the U.S. champions. Experts compare the law to the 1986 U.S.-Japan Semiconductor Agreement which led to the demise of the Japanese chip industry.

Samsung and SK are faced with an unprecedented dilemma: They must bear the risk of exposing their chip technology to the U.S. in return for the subsidy or should give up the subsidy if they really want to keep their technology secret. The dramatic transition of the global semiconductor market from memory chips to system chips is pushing Korea into a corner. Korean chipmakers failed to narrow the gap with the TSMC of Taiwan in the foundry market while they are rapidly losing competitiveness with Chinese rivals who are catching up fast. If the Chips Act goes into effect under such tough circumstances, the competitiveness of our chip industry will decline precipitously enough to affect the entire economy.

A hurried trip to Washington by Korean Trade Minister Ahn Duk-geun reflects the urgency of the government to complain about the excessive demands in the Chips Act and prepare “safety mechanisms.” The time has come for the government to find a breakthrough to solve the problem before it’s too late.

The most powerful tool for negotiation is close communication between heads of state. Fortunately, President Yoon and his aides are working hard to learn lessons from the past failures of Japan and others to help our chip sector stay afloat. We urge the president to bring home good results in his third meeting with Biden in April.