How should Korea’s chip sector respond to US push for memory fabs?

US Commerce Secretary Howard Lutnick has announced plans for targeted semiconductor tariffs aimed at pressuring companies to manufacture chips within the United States. The policy would impose higher tariffs on foreign companies that do not have production facilities in the US, putting pressure on foreign chipmakers to invest in American manufacturing.

This comes as a joint initiative by the Korean government and chipmakers is underway to build massive semiconductor complexes in Yongin, near Seoul, and the Honam region in South Korea, with the goal of establishing Korea as a leader in advanced chips for artificial intelligence. Lutnick stated that the US administration is developing a "targeted, thoughtful tariff policy" for semiconductors, emphasizing that companies that build factories in the US would not face tariffs, while those that do not would be subject to them.

The tariffs are expected to offer lower rates to companies investing in US chipmaking, while imposing higher tariffs on non-investors. The US policy is similar to the approach taken during the Trump administration, which offered tariff relief for pharmaceuticals manufactured in America and most-favored-nation status for those companies.

Lutnick drew an analogy to this approach for semiconductors, suggesting that companies should aim for similar treatment. The semiconductor tariffs could extend to finished products containing semiconductors, including laptops, gaming consoles, and AI data center servers, according to Politico. The US currently only imposes tariffs on specific products, including advanced AI chips like Nvidia's H200, which are imported into the US and then reexported.

This move is seen as part of a broader effort to strengthen domestic semiconductor production and develop the US supply chain for the industry. Chang Sang-sik, director general of the Korea International Trade Association, noted that Washington is steadily increasing pressure on foreign chipmakers to invest in the US, particularly Taiwan, which has a preferential tariff treatment under a trade agreement with the US.

Lutnick stated that global chipmakers, including Taiwan Semiconductor Manufacturing Company (TSMC) and Micron, have committed to a combined $1.2 trillion in US investments. Taipei is expected to announce another $20 billion to $30 billion in US investments next week. The pressure from Washington could complicate the Korean government's efforts to coordinate major investments by Samsung Electronics and SK Hynix, which plan to spend around 800 trillion won to build new semiconductor factories in South Korea's southwestern Honam region.

Some experts argue that targeted semiconductor tariffs could backfire on US companies, as higher tariffs on memory chips imported from Korea would ultimately burden US tech giants that rely on those chips. Korean chipmakers may attempt to persuade the US government to grant exemptions based on workforce considerations and existing investments in the US.

The Blue House has stated that the details of the US semiconductor tariff plan have not been finalized, but they will closely monitor developments and work with the US to ensure that Korean companies are not adversely affected.