Availing the US chip subsidy is not so easy for Samsung

Seeing the chip shortage during the Covid-19 lockdowns, the US government announced $52.7 billion in semiconductor production and research subsidies. Samsung is also building a big chip manufacturing unit in the US, but, availing the govt. the subsidy isn’t an easy task, via NikkeiAsia.

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For Samsung Elec, taking the Biden administration’s offer of subsidy for building a US chip plant is no easy choice. That is because the aid comes with strings attached, including a rule that recipients share “excess profits” with the US government.

Commerce Secretary Gina Raimondo on Feb. 23 said the program was designed to “bring semiconductor manufacturing back to the US” and to build a robust R&D ecosystem.

“We will continue to enforce restrictions, in coordination with our allies, that protect us and them from the misuse of these technologies by malign actors,” she said.

However, taking the Biden administration’s offer will mean submitting to strict conditions disclosed on February 28. It’s reported that the OEMs availing subsidy benefits must have to meet employment targets and use American-made construction materials.

Besides, the companies will be restricted from expanding semiconductor manufacturing capabilities in China for 10 years. Due to the rules, Samsung might have to share sensitive tech info and trade secrets with rivals in America such as Intel and Micron Technology.

“Technology fundamental to business operations could be exposed.  said Lee Chang-yang, South Korea’s minister of trade, industry and energy.

South Korean companies like Samsung Electronics see a cautionary tale in Japan. Japan and the US signed a bilateral semiconductor accord in 1986 that squeezed the Japanese semiconductor industry and contributed to its decline.

“I want the United States to be the only country in the world where every company capable of producing leading-edge chips will have a significant R&D and high-volume manufacturing presence,” Raimondo said.

It is also reported that if Samsung gets the US subsidies, additional investments in the Chinese facility will face restrictions. Even with South Korean President Yoon Suk Yeol prioritizing the bilateral alliance with the US, the Biden administration’s rules are not easy to swallow.