With President-elect Donald Trump returning to office, South Korean semiconductor leaders Samsung Electronics and SK Hynix face increased uncertainty surrounding their U.S. investments under the Chips Act. Many industry experts advise both companies to secure agreements with the current Biden administration to lock in favorable terms and to reduce risks.
Insiders suggest that Samsung and SK Hynix remain prepared to revisit negotiations with the Trump administration if needed, though they are firm on not committing to unfavorable terms.
In parallel, the S. Korean government is actively supporting the companies, emphasizing their contributions to U.S. semiconductor production. Experts suggest that S. Korea should seek additional benefits, such as subsidies and tariff reductions, in recognition of these contributions.
Under the Biden administration, CHIPs Act subsidies are issued in phases once companies begin their investments. The process begins with a preliminary memorandum of understanding (PMT) with each company, followed by due diligence and site inspections before signing a final contract. Even after the final contract, subsidies are only provided when companies meet specific performance metrics set in coordination with the U.S. Department of Commerce.
Currently, Samsung and SK Hynix have already signed PMTs with the Department of Commerce. Although Samsung has made substantial investments, it has not yet received subsidies, and the Department of Commerce is conducting inspections and discussing specific performance targets with the companies.
Given the situation, many in the industry believe it would be advantageous for Samsung and SK Hynix to finalize contracts under the Biden administration, as this could help them avoid complications if renegotiations become necessary once Trump takes office. Since delays in finalizing the agreement could lead to new performance requirements, moving forward promptly is seen as beneficial.
Kim Hyok-jung, a North America economic expert at the Korea Institute for International Economic Policy (KIEP), noted, “Once a final contract is signed, the U.S. government is obligated to follow it as long as the agreed benchmarks are met. If the companies meet these conditions but still don’t receive the subsidies, the contract includes compensation measures, making it challenging for a new administration to change these terms.”
Additionally, Yoo Hoi-jun, Dean of KAIST’s Graduate School of AI Semiconductor Technology, observed that the Biden administration is close to a subsidy agreement with Taiwan’s TSMC. He commented, “Samsung and SK Hynix should keep pace with these developments. If TSMC secures a deal, similar agreements for S. Korean companies would likely follow.”
If S. Korean companies fail to finalize their semiconductor subsidy agreements under the Biden administration and the issue is passed on to the Trump administration, it’s likely that U.S. will push for stricter conditions.
In particular, the Trump administration could tighten the act’s “guardrail” provisions, which restrict companies receiving U.S. subsidies from expanding certain semiconductor operations or transferring sensitive technologies to countries like China. Beyond subsidies and tariffs, these additional restrictions could mean tougher regulations on importing semiconductor equipment into China, a significant concern for Samsung Electronics and SK Hynix. The U.S. government may use this vulnerability as leverage, as these restrictions target critical points in the companies’ supply chains.
Currently, Samsung operates a NAND flash plant in Xi’an, China, which supplies around 20% of its global NAND production. Meanwhile, SK Hynix relies on its DRAM plant in Wuxi, China, for approximately 40% of its total DRAM output. The guardrail provisions could potentially impact these facilities, posing operational and strategic challenges for both companies.
