US Semiconductor Law Guardrails Finalized...Domestic Industry Says "Worst Is Avoided"

As the U.S. government finalized the expansion limit of semiconductor production in China for companies receiving subsidies under the Semiconductor Act at 5% as per the draft, the domestic semiconductor industry has responded that it has, for now, managed to hold its ground.

[Image source=Yonhap News]

On the 22nd (local time), the U.S. Department of Commerce released the final regulations on the semiconductor law guardrails (safeguards). According to the final version, companies that receive subsidies and then "substantially expand" semiconductor production capacity in countries of concern such as China within the next 10 years must return the full amount of the subsidy. Substantial expansion is defined as 5% or more for advanced semiconductors and 10% or more for general-purpose semiconductors of the pre-28nm generation.

The final version is not significantly different from the detailed guardrail provisions the U.S. government disclosed in March. Accordingly, the domestic semiconductor industry feels that "the worst-case scenario has been avoided." Positive aspects include changing the production capacity measurement standard (wafer input volume) from a monthly to an annual basis and allowing facilities under construction to be recognized as exceptions to the guardrail limits upon consultation with the Department of Commerce.

The Ministry of Trade, Industry and Energy also released a statement on the same day, saying, "It reflects the general business environment of the industry and guarantees normal business activities without national security concerns." The change to allow companies to set investment amount limits through agreements when expansion exceeds 5% (previously based on $100,000) also provides reassurance.

However, some responses indicate it is still too early to weigh the pros and cons. The Korean government has requested that the U.S. increase the threshold for substantial expansion of advanced semiconductors from the existing 5% to 10%, emphasizing that the guardrail provisions should not be implemented in a way that imposes undue burdens on companies investing in the U.S., but this request was effectively not accepted.

Meanwhile, Samsung Electronics and SK Hynix did not issue official statements regarding the final regulations on the day.