U.S. Democratic Party's Win Poses Risk for Korean Semiconductors
Analysis suggests that if the U.S. Democratic Party takes control of Congress, changes in policies and regulations will be limited, which could have a positive effect on the financial market. However, there is a forecast that if regulations on data center construction are strengthened at the state g
The U.S. Democratic Party's anticipated win in the 2022 midterm elections may pose potential challenges to the flourishing Korean semiconductor industry, according to a Bloomberg Economics analyst, Tom Orlik. If the Democrats secure both the Senate and the House of Representatives, the possibility of new policies and regulations, or alterations to the tax system, becomes less likely due to the deadlock scenario.
The S&P 500 index has shown an upward trend in the year following midterm elections since 1950, which could positively impact the financial market.
However, the analyst warns that strengthened regulations on data center construction at the state government level in the U.S. could have adverse effects on the Korean semiconductor industry. Voter concerns about escalating electricity and water bills, as indicated during the midterm elections, might lead to construction restrictions.
Analyst Orlik pointed out that a significant number of data centers planned in the U.S. from 2022 to 2028 are set to be built in states holding midterm elections. If Democratic governors emerge victorious or Republican governors interpret the voters' displeasure with data centers, the pace of construction could be hampered, which could translate into reduced orders and profitability for Korean semiconductors.
Orlik also emphasized that the Democratic Party's control over Congress could further impact investment agreements with the U.S., as the party might closely scrutinize the administration's acquisition of stakes in private companies and foreign corporate investment agreements. However, the likelihood of strengthening tariff policies post-midterm elections is considered low.
Analyst Kwon Hyo-sung from Bloomberg concurred, stating that it is difficult to further intensify trade policies. Nevertheless, he noted that owing to substantial current account surpluses in both Korea and Taiwan, the pressure to expand semiconductor investments in the U.S. for these companies is likely to persist.
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