In an Oct. 25 podcast interview, U.S. presidential candidate and former President Donald Trump sharply criticized the Biden administration’s CHIPS and Science Act, stating, “That chip deal is so bad, we put up billions of dollars for rich companies to come and borrow the money and build chip companies here, and they’re not going to give us the good companies anyway.” By “rich companies,” Trump is believed to refer to major players such as South Korea’s Samsung Electronics and SK Hynix, as well as Taiwan’s TSMC. He further proposed imposing high tariffs on semiconductors to compel these companies to establish factories in the U.S. “All you had to do is charge them tariffs,” he added. “If you put a tariff on the chips coming in, you would have been able to - just like the auto companies, no different. More sophisticated, no different.”
As Trump maintains a hardline stance on China, semiconductor sanctions against the country are expected to persist regardless of the election outcome. However, his proposed high tariffs introduce new uncertainties for the global semiconductor industry, which has relied on tariff-free trade for nearly 30 years under the World Trade Organization’s Information Technology Agreement (ITA), established in 1997 to foster growth in the global IT sector. “If Trump removes subsidies and imposes tariffs, it would be a breach of trust by the U.S. government, plunging the global semiconductor industry into chaos,” commented a representative from South Korea’s semiconductor sector.
Should Trump be elected, some predict he may designate advanced semiconductors as strategic assets, pushing to exempt them from existing trade agreements and imposing tariffs. Combined with a potential reduction or cancellation of subsidies promised under the Biden administration, this could lead semiconductor companies that have committed billions of dollars to U.S. investments to rethink their plans. Due to high labor and material costs, building plants in the U.S. costs over 30% more than in South Korea. For example, constructing a single advanced semiconductor production line costs roughly 25 trillion won, with 7 to 8 trillion won potentially offset by subsidies.
Companies that have announced U.S. investments under the CHIPS and Science Act include Intel, TSMC, and Samsung Electronics. While Intel, a U.S.-based company, has pledged approximately $100 billion, Samsung Electronics has committed $44 billion, expecting $6.4 billion in subsidies; TSMC has planned $65 billion with $6.6 billion in subsidies, and SK Hynix has pledged $3.87 billion, with a $450 million subsidy. Samsung began construction of its Texas plant in April, while TSMC has broken ground in Arizona. U.S. government subsidies are scheduled to be distributed as construction advances, though most funding has yet to be received. Should Trump cancel these subsidies, companies would likely be forced to reconsider their investment plans entirely. “Investment plans in South Korea are aligned with U.S. investments in terms of production capacity and processes,” said an industry official. “If U.S. investments stall, other business strategies will also be affected.”
However, some experts argue that implementing a “semiconductor tariff” would be challenging, even for Trump, due to the legal complexities of the ITA and the South Korea-U.S. Free Trade Agreement (FTA), which could face significant opposition. “There is limited legal basis for exempting semiconductors from FTAs or ITA provisions,” said Han A-reum, a senior research fellow at the Korea International Trade Association’s Institute for International Trade. Furthermore, tariffs that drive up semiconductor prices could increase costs for U.S. companies and consumers, impacting firms like Apple and NVIDIA.
Some analysts believe Trump’s comments were more directed at Taiwan than South Korea. In the interview, he remarked, “You know, Taiwan, they stole our chip business, okay?” This implies a focus on TSMC, which produces advanced semiconductors, rather than on South Korea’s Samsung Electronics and SK Hynix, which mainly manufacture and export memory chips. “TSMC’s advanced semiconductors are essential for the AI industry, giving them significant strategic value,” noted Yoo Hoi-jun, a professor at the Korea Advanced Institute of Science and Technology (KAIST). “Trump likely wants to exert greater control over TSMC.”
