[Peace&Chips] Semiconductor Sites with Strict Security... US Subsidy Conditions Are 'Unreasonable'

SK Hynix Icheon Campus Security Tightened
Strict Security for Both External Visitors and Internal Employees

Subsidy Application Criteria Ignoring Industry Characteristics
Various Confidential Information Demands... Only Benefits the US

Editor's NoteSemiconductors, often called the rice of modern industry. Although it's a term we hear every day, it's hard to explain when asked. Peace & Chips will make the complex concepts and overall industry trends of semiconductors easy to digest for you. Just bring your spoon.

Last week, I visited Icheon, Gyeonggi Province to cover SK Hynix's 75th shareholders' meeting. Icheon is home to SK Hynix's headquarters, and the site is enormous, including semiconductor factories such as M14 and M16, as well as research and development (R&D) facilities. The scale was so large that shuttle buses ran with stops scattered throughout the premises.

Since the shareholders' meeting was held inside the semiconductor facility, the security was noticeably tighter than at other venues. At the entrance, identification was required. For security reasons, stickers had to be placed on both the front and back cameras of smartphones to prevent photography.

M16 exterior at SK Hynix Icheon Campus / Photo by SK Hynix

According to SK Hynix officials, these security rules are strictly enforced even for internal employees. If someone removes the sticker, security personnel immediately call them out. The sticker designs are even changed periodically.

Especially in semiconductor factories, security is so critical that employees who have worked at the company for years without involvement in production tasks are not allowed inside. This is similar to the reason why, during a press tour last year at Samsung Electronics' Pyeongtaek campus, only parts of the factory interior could be viewed through glass walls.

Inside view of Samsung Electronics Pyeongtaek Campus factory / Photo by Samsung Electronics

The reason semiconductor companies put such strong emphasis on site security is due to the industry's nature, where technological capability directly translates to business competitiveness. As semiconductor competition has expanded beyond individual companies to a geopolitical rivalry between nations, the entire process of semiconductor design, production, and sales is considered highly confidential. Recognizing this importance, countries have designated semiconductors as a national strategic technology and impose penalties for leaking key technologies overseas.

Considering these industry characteristics, the semiconductor subsidy application criteria recently proposed by the United States seem nothing short of 'absurd.' Each condition set by the U.S. could be confidential information for companies.

On March 27 (local time), ahead of the subsidy application opening on March 31, the U.S. disclosed the list of information that interested companies must submit. This included production capacity and yield (the ratio of good products) by wafer type at semiconductor factories, as well as factory utilization rates. Companies were also required to list the types of materials used in semiconductor production. Furthermore, they had to provide the first-year sales price and projections for production volume and sales price changes in subsequent years.

The domestic industry is facing many concerns. Samsung Electronics plans to showcase an advanced foundry (semiconductor contract manufacturing) plant in the U.S., and SK Hynix will present an advanced semiconductor packaging facility. However, to receive subsidies, companies must not only give away their flesh but also their bones. Yield, especially in the foundry sector, is a barometer of a company's technological prowess. Submitting such core information, known only to a few internally, is required.

The U.S. argues that since the subsidies are funded by American taxpayers, strict conditions are justified. However, these conditions are so excessive that criticism is pouring in domestically as well. A representative case is when 14 Republican senators sent a letter to Commerce Secretary Gina Raimondo on February 22 (local time), stating that the subsidy application criteria contradict the intent of Congress and demanding unnecessary conditions be revised.

TSMC, a Taiwanese foundry company eligible for subsidies, has also expressed discomfort. On March 30 (local time), TSMC Chairman Liu Deyin said at the Taiwan Semiconductor Industry Association's general meeting, "There are unacceptable conditions," and "We hope the conditions can be adjusted to avoid negative impacts."

This article is from [Peace & Chips], published weekly by Asia Economy. Click subscribe to receive articles for free.

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