"Build a Factory in the US or Accept Tariffs"... 'Localization and Diplomatic Response' Are Key [Trump 2nd Term D-3]

"Tariff Pledge Seen as a Negotiating Card"
Local Investment Stance Expected to Continue

Since the inauguration of President-elect Donald Trump, our semiconductor industry has been discussing universal tariffs and subsidies. He announced plans to impose universal tariffs of 10-20% on all imports and an additional 60% tariff on Chinese products. The export competitiveness of Korean semiconductors, which have enjoyed duty-free benefits under the Korea-US Free Trade Agreement (FTA), could be impacted. The Korea Institute for International Economic Policy estimated that if the Trump administration imposes a 10% universal tariff, Korea's exports to the US could decrease by approximately $15.2 billion (about 21 trillion won). However, the Trump transition team is discussing options to gradually raise the tariff rate or switch to selective tariffs. Senior researcher Lee Mi-hye from the Export-Import Bank of Korea stated, "The high tariff pledge is likely to be used as a negotiation card."

The general consensus is that the CHIPS Act, which underpins semiconductor support, is unlikely to be scaled back. This is because the regions benefiting from the bill, such as Texas (Samsung Electronics) and Indiana (SK Hynix), are Republican strongholds. Samsung Electronics plans to invest $37 billion (about 54 trillion won) in local production by 2030, and SK Hynix plans to invest $3.87 billion (about 5.6 trillion won) by 2028.

A semiconductor industry official said, "Subsidy contracts signed under the Biden administration are paid according to the progress of investments," adding, "If trust is lost with the new Trump administration and subsidies are not received, it could lead to investment losses, so we will strengthen networking with key personnel and respond according to policy changes." Another official said, "In the short term, there may be adjustments in investment speed due to factors like rapid exchange rate fluctuations, but it will be difficult to fundamentally change the current investment stance."

The new Trump administration aims for ‘de-coupling’ China completely from the semiconductor value chain. Shin Hyun-chul, president of the Semiconductor Engineering Society and professor of Semiconductor Systems Engineering at Kwangwoon University, pointed out, "In the short term, Chinese companies will face difficulties accessing advanced technologies and equipment, allowing Korean companies to expand market share or fill supply gaps. However, in the long term, there is a significant risk of losing the huge Chinese market, accelerating China’s technological self-reliance and emerging as a stronger competitor."

K Power Equipment, Opportunity in the North American Market

In December last year, Koo Ja-kyun, Chairman of LS Electric (second from the left in the front row), Kim Ho-ryang, President of affiliate KOC Electric, and employees from both companies are taking a commemorative photo at the Ulsan factory for the expansion of the ultra-high voltage transformer production plant. Photo by LS Electric

In the domestic power equipment sector, direct market expansion opportunities are expected with the launch of the second Trump administration. President-elect Trump pledged to increase power production and meet energy demands in the AI era. In a campaign rally in Michigan last August, he emphasized, "To meet the demands of new industries requiring massive power, we will expand power production," and added, "I will declare a national emergency to approve new drilling, pipelines, refineries, power plants, and nuclear reactors." Previously, the Trump administration also advocated for power infrastructure replacement during its first term. The US power grid, built in the 1950s, is aging. With recent expansions of semiconductor factories and AI data centers, power demand has surged, and the US Department of Energy reported that transmission capacity must increase by 14% by 2030 and 49% by 2050. The share of data centers in total US power consumption is also expected to rise from 2% in 2022 to 8% by 2030.

Domestic power equipment companies are strengthening technology and expanding local investments to meet growing demand. HD Hyundai Electric completed an expansion of its Alabama plant last July, and LS Electric is establishing its first production base in Texas. Hyosung Heavy Industries decided to expand its US plant last June and plans to increase ultra-high voltage transformer production from 2026. However, despite market expansion, concerns about anti-dumping tariffs remain. During Trump’s first term, a 60% anti-dumping tariff was imposed on domestic transformer companies. Jo Yeon-ju, a researcher at Mirae Asset Securities, analyzed, "Considering the current supply shortage, the likelihood of imposing similarly high tariffs during Trump’s second term is low."

Will the Gap in AI and Platform Industries Widen Further? 'Dark Clouds'

The second Trump administration is expected to prioritize America First policies in the information and communication technology (ICT) industry as well. It is likely to strengthen AI technology dominance and ease regulations on domestic big tech companies. The domestic industry is concerned not only about widening technological gaps but also about dependence on big tech.

In the AI industry, it is anticipated that the withdrawal of AI executive orders will create a freer development environment. President Joe Biden signed an executive order last year emphasizing user safety over performance in AI development. On the other hand, AI technology is viewed as a national strategic asset, and related export controls are expected to be strengthened. Exports of US-made AI semiconductors, open-source models, and related application technologies could be controlled. For domestic companies developing their own models or services based on these, this creates technological entry barriers. Kim Dong-hwan, CEO of FortyTwoMaru, predicted, "If the Trump administration controls GPUs and blocks open source, domestic technological development will lag, and dependence on the US will increase."

Platform companies such as Naver and Kakao are also concerned about deepening dependence on big tech. President-elect Trump has expressed opposition to breaking up Google, signaling a relaxation of antitrust regulations on domestic big tech. Meanwhile, in Korea, platform regulations are being promoted to pre-designate and regulate platforms with significant market influence. Kwon Jae-han, senior researcher at the Digital Economy Research Institute of the Korea Internet Corporations Association, said, "This could further widen the competitiveness gap between platform companies in the two countries," adding, "Domestic platforms will face increased pressure as they risk falling behind in global market competition."