U.S.-Taiwan strongarm deal leaves Korean chip makers worried they might be next

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U.S.-Taiwan strongarm deal leaves Korean chip makers worried they might be next

Published: 16 Jan. 2026, 19:24 Updated: 18 Jan. 2026, 19:44

Audio report: written by reporters, read by AI

U.S. President Donald Trump listens to C.C. Wei, chairman and CEO of Taiwan Semiconductor Manufacturing Company (TSMC), as they make an announcement about an investment from TSMC in the Roosevelt Room at the White House in Washington on March 3, 2025. [REUTERS/YONHAP]

Taiwan has secured exemptions from looming U.S. semiconductor tariffs by pledging to expand production on U.S. soil, a development analysts say will have limited immediate impact for Korea but underscores the vulnerability of its export-driven chip industry to shifting U.S. trade rules.

With U.S. Commerce Secretary Howard Lutnick once again mentioning the possibility of 100 percent tariffs on chip companies that don't build in America on Friday, Korean players such as Samsung Electronics and SK hynix remain on edge.

Under the deal made between the United States and Taiwan on Thursday, the United States agreed to lower tariffs on Taiwan to 15 percent and to exempt Taiwanese semiconductor companies from additional product-specific chip tariffs if they build manufacturing facilities in the United States, Reuters reported.

Taiwanese companies are committed to investing at least $250 billion to build the facilities in the United States, while the Taiwanese government will provide an additional $250 billion in credit guarantees to help smaller enterprises expand there, according to the U.S. Department of Commerce.

The structure of the agreement links tariff relief directly to U.S.-based production. Taiwanese companies constructing new semiconductor plants in the United States will be allowed to import a set volume of chips without paying product-specific duties.

During construction, the companies can bring in tariff-free shipments equal to up to 2.5 times the planned production capacity of the new facility. Once the plant is completed, that allowance falls to 1.5 times its production capacity.

In practical terms, a company building a factory capable of producing 1 million wafers could ship 2.5 million wafers from Taiwan to the United States during construction without incurring additional duties, and up to 1.5 million wafers annually after the facility starts operating.

The arrangement makes clear that tariff benefits would grow in proportion to the amount of production that moved onto U.S. soil.

U.S. Commerce Secretary Howard Lutnick speaks during a signing ceremony in the Oval Office at the White House in Washington on Jan. 14. Trump signed a bill allowing schools to serve whole and 2 percent milk. [EPA/YONHAP]

At the center of the deal is TSMC, the world’s largest contract chipmaker. TSMC is already building or expanding six semiconductor plants in Arizona and plans to add five more under the new framework, according to a New York Times report.

The U.S. secretary of commerce said the investment includes the $100 billion TSMC previously committed, with additional investment to follow.

“They just bought hundreds of acres adjacent to their property,” Lutnick said in an interview with CNBC, referring to TSMC's facilities in Arizona.

"[The company] will come in huge, bigger — you’ve seen reports on possibly doubling in size,” he said.

Lutnick said the administration’s broader objective is far-reaching. “The objective is to bring 40 percent of Taiwan's entire supply chain and production, to domestically bring it into America,” he said, warning that if companies “don't build in America, the tariffs are likely to be 100 percent.”

This photo shows the logo of Taiwan Semiconductor Manufacturing Company (TSMC) during the Taiwan Innotech Expo at the World Trade Center in Taipei, Taiwan, Oct. 14, 2022. [AP/YONHAP]

For Korea’s semiconductor industry, the immediate effects of the U.S.-Taiwan agreement appear limited. On Wednesday, the United States issued a proclamation imposing a 25 percent tariff on certain advanced AI semiconductors, including Nvidia’s H200 chips. But the measure applies only to chips imported into the United States and then reexported overseas. Chips imported for U.S. data centers or for consumer, industrial or public-sector use are exempt.

That distinction protects much of the current U.S. demand served by Korean chipmakers, at least for now.

The longer-term uncertainty lies in whether Washington will apply similar conditions to Seoul. The United States described the 25 percent tariff as part of a “first phase” and signaled that it could expand duties across a broader range of semiconductor products. The proclamation also stated that companies investing in specific segments of the U.S. semiconductor supply chain could qualify for a “tariff offset program,” suggesting that future tariff exposure may be shaped through negotiations over investment.

Lutnick on Friday also stressed that companies must “pay a 100 percent tariff, or they can build in America,” speaking to reporters at a groundbreaking ceremony for a new Micron Technology plant in New York. He added that the approach amounts to an “industrial policy.”

Separately, a Trump administration official said the United States would pursue “separate agreements for separate countries” when asked by Yonhap News Agency whether the semiconductor tariff exemption standards agreed with Taiwan would also be applied to Korea.

The Korean government, however, sought to play down concerns, saying any disadvantages for Korea would be minimized.

"The recent proclamation focuses on advanced chips produced by Nvidia and AMD, and excludes memory chips, which account for the bulk of Korean exports," Trade Minister Yeo Han-koo said on Saturday, upon returning to Seoul after a trip to Washington, adding that "the impact on Korea would be limited."

"It is too early to feel reassured as it remains unclear when and in what form a second phase of measures could be introduced, so we need to prepare for potential follow-up actions by the United States," he said.

Korea sought to limit that risk during bilateral trade talks last November, when it secured assurances that it would not face treatment worse than that accorded to Taiwan, Japan or the European Union in the chip sector. But the agreement did not include explicit exemptions or volume-based guarantees.

U.S. President Donald Trump holds a bill that returns whole milk to school cafeterias across the country, in the Oval Office of the White House on Jan. 14, in Washington. [AP/YONHAP]

That ambiguity leaves room for pressure to build, according to domestic industry insiders.

Samsung Electronics is nearing completion of a $37 billion foundry plant in Taylor, Texas. SK hynix is building an advanced semiconductor packaging facility in West Lafayette, Indiana, with a $3.87 billion investment. Both projects now sit at the center of Washington’s evolving trade strategy.

“The biggest concern for the United States is its heavy reliance on overseas semiconductor supply chains,” said Ahn Ki-hyun, executive director of the Korea Semiconductor Industry Association. “That is why tariffs can be used at any time as a negotiating tool to pressure counterparts depending on the situation.”

“The solution lies in securing unrivaled technological competitiveness that goes beyond tariff pressure,” Ahn added.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY KIM SU-MIN, SARAH CHEA [[email protected]]