In his first congressional address of his second term, US President Donald Trump reaffirmed his commitment to repealing the CHIPS and Science Act, a policy shift that has unsettled South Korea's semiconductor industry. Analysts suggest that while a full repeal may face legislative hurdles, the administration could still use regulatory reviews to scale back subsidies, putting pressure on companies like Samsung Electronics.
Chosun Biz and The Hankyoreh reported that Trump condemned the CHIPS Act as a "horrible, horrible thing," arguing that the US should not be subsidizing corporations. He asserted that imposing higher tariffs, rather than offering financial incentives, would be a more effective strategy to attract semiconductor investment. Trump also called on Congress to reallocate the remaining funds from the CHIPS Act to address the national debt or other fiscal concerns.
Debate over the CHIPS Act's future
Passed with bipartisan support in 2022 under the Biden administration, the CHIPS Act was designed to strengthen US semiconductor production and reduce dependence on China. The legislation provides US$52 billion in subsidies, including US$39 billion for semiconductor manufacturing and US$13 billion for R&D. Major recipients include Samsung, SK Hynix, and TSMC.
Analysts suggest that repealing the CHIPS Act outright would be a formidable challenge for Trump, as congressional approval is required. Hyeon-ik Lee, an associate research fellow at the Science and Technology Policy Institute (STEPI), pointed out that lawmakers from districts benefiting from semiconductor investments are likely to resist any repeal attempts.
Trump's previous policy reversals indicate that rolling back CHIPS Act subsidies may face legal obstacles. His administration's efforts to repeal the Green New Deal (GND) and suspend funding for the Inflation Reduction Act and the Infrastructure Investment and Jobs Act led to court battles, with federal judges issuing temporary restraining orders. Kyunghyang Shinmun noted that similar legal challenges could arise if the administration attempts to revoke CHIPS Act subsidies.
With CHIPS Act subsidies still pending distribution, the Trump administration could reassess agreements with individual companies, potentially delaying or restricting payouts.
Potential financial impact on Samsung & SK Hynix
Top semiconductor firms, including Samsung, SK Hynix, and TSMC, are expected to receive CHIPS Act subsidies covering 5% to 15% of their investments. According to Hankook Ilbo and News Quest, TSMC secured US$6.6 billion for its Arizona plant, Samsung's Taylor, Texas facility was allocated US$4.745 billion, and SK Hynix is slated to receive up to US$458 million for its AI memory packaging facility in Indiana.
The Trump administration may attempt to reduce overall subsidy allocations or postpone disbursements. Hyok-jung Kim, an assistant researcher at the Korea Institute for International Economic Policy (KIEP), noted that eligibility requirements could become more stringent, with a stricter approval process and potential renegotiation of agreements.
Credit: AFP
Samsung faces the biggest risk
Changes to subsidy terms under the Trump administration could create uncertainty for South Korean investments in the US. Samsung originally planned to invest US$44 billion but scaled back its commitment by 17.8% to US$37 billion by the end of 2024. In July 2023, SK Group Chairman Tae-won Chey cautioned that without subsidies, the company might need to reassess its US investment plans.
Samsung is building a wafer fabrication plant in Taylor, Texas, to manufacture sub-4nm chips. According to NewsPim, while the facility's structural framework is complete, the company has struggled to secure major clients like Nvidia and Qualcomm. As a result, Samsung has reportedly slowed construction, sparking concerns that its final investment size may not meet initial projections.
Analysts warn that these challenges could give the Trump administration grounds to reduce or withdraw Samsung's subsidies. However, some experts argue that CHIPS Act subsidies are legally binding, and any unjustified refusal to distribute funds could lead to legal action against the US government.
The Trump administration plans to impose a 25% tariff on imported semiconductors next month, adding pressure on South Korean chipmakers. Trump claimed that South Korea's average tariff rate is four times higher than that of the US, justifying a shift in trade policy. However, under the US-Korea Free Trade Agreement, South Korea's tariff on US imports averages just 0.79%, though Trump has continued to target South Korea in trade discussions.
Industry response and future outlook
Lee stressed the importance of South Korea adopting a more strategic approach to highlight the economic benefits of its US investments to Washington. The Biden administration previously estimated that the CHIPS Act would generate 3,500 manufacturing jobs and 12,000 construction jobs at Samsung's Texas facility, while SK Hynix's Arizona plant was projected to create 1,000 jobs.
Conclusion
Trump's efforts to repeal the CHIPS Act and impose tariffs on semiconductor imports could disrupt South Korea's chip industry. Samsung, in particular, faces heightened uncertainty over its US investment plans. Analysts suggest that Congress will be key in deciding the law's fate, while legal action remains a potential avenue for companies seeking to secure their subsidies. The situation is evolving, with further developments anticipated.
Article edited by Jack Wu
