hankyoreh

President Joe Biden of the US speaks at a House Democratic caucus issues conference in Baltimore, Maryland, on March 1. (AFP/Yonhap)

The US has disclosed the conditions for granting subsidies to companies that invest in semiconductor manufacturing as part of its attempt to reorganize the entire chip supply network around itself. These strict conditions unilaterally imposed by the US place a burden on South Korean companies that are investing large sums of money to build factories in the US.

The conditions for subsidizing semiconductor manufacturing investments that were published by the US Department of Commerce on Feb. 28 prioritize the US’ national interest and national security. The primary recipients of the subsidies will be chipmakers that help the US develop cutting-edge weaponry, and companies that receive more than US$150 million in subsidies are required to share part of earnings that exceed a certain threshold with the US government.

The Commerce Department has also said it will take into account the feasibility of long-term factory operation when reviewing applications, which some say amounts to a demand for companies’ business secrets and technology.

Another proviso is that subsidy awardees that knowingly take part in joint research or technology licensing with “countries of concern” (read: China) would have to pay back all the subsidies received.

The Commerce Department will also be unveiling “guardrails” that will prevent companies from upgrading production facilities in China above a certain level for the next decade.

There are serious concerns that these rules present a dilemma with potentially crippling consequences for South Korean chipmakers, who operate large plants in China and are more than 40% dependent on the Chinese market.

The US has sought to rope South Korea, Japan and Taiwan into a “chip alliance” as it seeks to achieve hegemony in its technological competition with China. It wants to reorganize the global division of labor in the semiconductor sector such that design is handled by the US, production by Korea and Taiwan, and parts and materials by Japan.

The US evidently intends to use these subsidies to attract Korean and Taiwanese companies to the US, ultimately expanding its domestic chipmaking capacity.

One of the major domestic agendas of the Biden administration is reviving the US’ manufacturing sector to rebuild the middle class. President Joe Biden remarked that the US is “the most secure investment” while touting Korean companies’ investments in the US and the passage of the CHIPS and Science Act in a speech before the House Democratic caucus on Wednesday.

If the US maintains a protectionist attitude that prioritizes domestic industries and companies to the detriment of its allies while expecting those same allies to play a bigger role in its hegemonic competition with China, it will surely undermine the cohesion of those alliances.

As the US, a longtime proponent of alliance relationships, puts the entire Korean semiconductor industry in a bind, the Korean government and companies need to lodge a clear and firm protest about this matter. Korea must not allow a repeat of the discrimination that Korean-made electric vehicles suffered in subsidies provided through the US’ Inflation Reduction Act last year.

Please direct questions or comments to [english@hani.co.kr]