Semiconductor Companies Busy Calculating Moves Amid US Actions... Competing to Secure Subsidies [US, China Semiconductor Precision Strike]

[Image source=Reuters Yonhap News]

[Asia Economy reporters Jeong Hyunjin and Moon Chaeseok] As the United States' pressure on China intensifies over global semiconductor dominance, major semiconductor companies are busy calculating the pros and cons of the long-awaited U.S. CHIPS Act, while closely monitoring the situation to avoid damage from U.S. attacks on China, such as equipment export restrictions.

The UK Financial Times (FT) recently reported that after the "CHIPS and Science Act," also known as the CHIPS Act, passed the U.S. Congress on the 28th of last month (local time), competition among semiconductor companies to receive support has begun.

The CHIPS Act includes $52 billion in support for establishing advanced semiconductor manufacturing and research and development (R&D) facilities, with up to $3 billion per project for new factory construction, totaling $39 billion. Major semiconductor companies such as U.S.-based Intel, Samsung Electronics, and Taiwan's TSMC have already promised investments or started construction of new semiconductor factories in the U.S. This funding is expected to be a key factor in attracting semiconductor companies, drawing attention to how it will be allocated.

The U.S. Department of Commerce has not yet disclosed the application procedures for receiving the funds, and since the support is funded by U.S. taxpayers, it has not mentioned what priorities will be set for selecting recipients. Although the U.S. Congress agreed to support foreign semiconductor companies building factories in the U.S., foreign media report that U.S. companies are lobbying to concentrate the funds on American firms. One U.S. semiconductor company suggested that support should be given to the company hiring the most R&D personnel domestically.

[Image source=Reuters Yonhap News]

Earlier, Intel CEO Pat Gelsinger mentioned last month that the scale of investment could change depending on the passage of the CHIPS Act. Samsung Electronics also announced a mid-to-long-term plan on the 22nd of last month to establish 11 new factories in Texas, U.S., which, although not explicitly stated, appeared to be a move considering the CHIPS Act. SK Hynix has also decided to invest in the U.S. Of the $22 billion SK plans to invest in the U.S., $15 billion will be used for building advanced packaging manufacturing facilities and semiconductor R&D cooperation with U.S. universities.

Pat Moorhead, a U.S. semiconductor expert, pointed out that "it is not as large as everyone thinks," noting that since building an advanced semiconductor factory costs over $10 billion, the U.S. Department of Commerce, responsible for distributing these funds, will face difficult choices.

However, since the U.S. CHIPS Act includes restrictions related to investments in China, global companies are expected to make judgments accordingly. Nikkei Asia reported on the 2nd that "the U.S. CHIPS Act forces semiconductor companies to choose between the U.S. and China."

Additionally, it has been pointed out that operating manufacturing facilities in the U.S. costs more than in Asia, which must be taken into account. The Wall Street Journal (WSJ), citing the Semiconductor Industry Association (SIA), reported that the cost of building and maintaining an advanced semiconductor factory in the U.S. for ten years is about 30% higher than in Taiwan, South Korea, and Singapore, and 50% higher than in China.

Peter Hanbury, a semiconductor analyst at consulting firm Bain & Company, considering that countries like South Korea, Taiwan, and China also support semiconductor manufacturing facilities, described the situation as a "subsidy competition for semiconductor manufacturing," evaluating that countries must compete to attract a limited number of companies.

The industry is closely watching whether U.S. restrictions on semiconductor equipment will impact sales and other aspects. Especially companies with factories in China may face situations where they cannot obtain U.S.-made equipment, forcing them to reconsider investment plans.

Moreover, the U.S. semiconductor equipment industry regards Chinese semiconductor companies as important customers, but due to government announcements, the range of products they can sell is shrinking, placing them in a dilemma. ASML of the Netherlands, known as the "super subcontractor" of the semiconductor industry, officially opposed the possibility of export restrictions to China not only on extreme ultraviolet (EUV) lithography equipment but also on deep ultraviolet (DUV) equipment earlier this year.