The Donald Trump administration has begun a review of the Chips Act implemented by the Biden administration. According to reports, discussions are underway to relax some subsidy eligibility requirements in line with the policy direction President Trump is pursuing, while further strengthening sanctions related to China. Domestic corporations, including Samsung Electronics and SK hynix, are closely monitoring the policy changes of the Trump administration, having promised investments in the U.S. under this law and agreed to receive subsidies.
◇ Trump administration reviews subsidy eligibility requirements
On the 13th (local time), Reuters reported, citing two sources, that the Trump administration is pursuing a renegotiation of semiconductor law funding and that some scheduled subsidy payments may be delayed. However, it added that it is still unclear how much the scope of changes and the impact on already signed contracts will be.
The semiconductor law, enacted in August 2022, is a key economic policy of the Biden administration, providing a total of $52.7 billion (approximately 76.8 trillion won) over five years, including $39 billion (approximately 56.8 trillion won) in production subsidies and $13.2 billion (approximately 19.2 trillion won) in research and development support for semiconductor companies investing in the U.S. This law was created in response to a sense of crisis over the lack of advanced chip manufacturing plants on U.S. soil, as well as to counter the aggressive rise of China’s semiconductor industry.
Global leading semiconductor corporations, including Samsung Electronics, SK hynix, and Taiwan's TSMC, have agreed to receive subsidies amounting to 5% to 15% of their investment for building factories in the U.S. However, even if they have signed contracts under the semiconductor law, actual subsidy payments must meet certain metrics defined in agreements between the U.S. Department of Commerce and individual corporations. Although Samsung Electronics and SK hynix signed subsidy agreements with the Biden administration, they have not yet received actual subsidies from the U.S. government. Regarding the Trump administration's review of payment conditions, Samsung Electronics and SK hynix have not received direct notifications about changes in subsidy conditions from the U.S. government as of now.
◇ “Using 'carrots and sticks' to pressure subsidy-receiving corporations”
The semiconductor industry expects that the Trump administration will relax social responsibility requirements among subsidy payment conditions for corporations while pressuring for increased investment in the U.S. and further tightening sanctions related to China. The Biden administration imposed social requirement conditions on semiconductor law beneficiaries, such as prioritizing the employment of workers who are union members and providing affordable childcare services to factory workers. However, at that time, the Republican Party raised criticisms like, “Why should unnecessary social obligation conditions be included, forcing corporations to cover the costs of building daycare centers with government subsidies?” It is reported that the Trump administration is also raising issues with this part. In response, the Semiconductor Industry Association of America stated, “We are prepared to work with the Trump administration to reduce the program requirements of the semiconductor law and to achieve our common goal of strengthening the U.S. semiconductor technology leadership.”
Regulations on China investments for corporations receiving semiconductor law subsidies are expected to be further strengthened. While the current law allows a certain level of investment in China, the Trump administration has expressed dissatisfaction toward corporations that pursue expansion in overseas markets, including China, after receiving semiconductor subsidies, according to Reuters. For instance, Intel announced in October that it would expand its packaging and testing facilities in Chengdu, China, after signing the semiconductor law contract in March of last year. Samsung Electronics and SK hynix also operate NAND flash factories in Xi'an, China, and DRAM factories in Wuxi, China, respectively.
The Biden administration has prohibited corporations from expanding advanced semiconductor production capacity by more than 5% based on wafers for 10 years from the time they receive subsidies through guardrail provisions in the semiconductor law. However, it is suggested that the Trump administration might introduce even stricter regulations. Kim Hyuk-jung, a researcher at the Korea Institute for International Economic Policy for North American economic policy, stated, “The Trump administration could lower the allowable extent of production capacity expansion for beneficiary corporations in China or extend the investment restriction period, while simultaneously requiring advancements in the schedule for building factories in the U.S. or an increase in local hiring.”