South Korea asks US to review China rule for chip subsidies

By Soo-hyang Choi

SEOUL (Reuters) – South Korea has asked Washington to review its criteria for new semiconductor subsidies, concerned over the impact of rules to limit chip investment in countries such as China, a U.S. public filing showed.

In March, the U.S. commerce department proposed rules to prevent China and other countries it deems to be of concern from tapping funds of $52 billion earmarked for semiconductor manufacturing and research under the so-called CHIPS Act.

A leading chipmaker and major investor in the U.S. chip sector, South Korea asked the United States to review the rule that prevents recipients of U.S. funding from building new facilities in such countries, beyond 5% of existing capacity.

“The Republic of Korea believes ‘guardrail provisions’ should not be implemented in a manner that imposes an unreasonable burden on companies investing in the United States,” South Korea said, using its official name.

The filing gave no further details, but the South’s Yonhap news agency said Seoul had asked to raise the limit to 10%.

South Korea’s industry ministry declined to comment.

The United States has said the incentives aim to help restore America’s leadership in semiconductor manufacturing, boost employment and ensure economic and national security.

South Korea’s Samsung (KS:) and SK Hynix, the world’s top two makers of memory chips, have invested billions of dollars in chip factories in China.

Samsung is building a chip plant in Texas that could cost more than $25 billion.

In its comments, Samsung Electronics (OTC:) Co Ltd sought clarification of the proposed rule to ensure that investments in the U.S. chip-making sector were “not unduly and unintentionally restricted,” a filing showed.

SK Hynix Inc also made comments, but the public version gave no details.

Its parent SK Group, which plans to invest $15 billion in the U.S. chip sector, some for an advanced chip packaging factory, has said it is considering applying for funding.

“Potential CHIPS Act funding recipients have numerous existing legacy facilities in China,” an industry group, the Semiconductor Industry Association, said.

“It is critical for these companies to be able to protect their past investments in these facilities by ensuring they remain commercially viable.”

SK Hynix and Samsung Electronics did not immediately provide comments to Reuters.

The United Auto Workers (UAW) union has said funding applicants should be ruled ineligible if they did not agree to allow union organising.

“The U.S. government should not be in the business of funding union-busting employers,” it said in a filing on Tuesday.

The commerce department began accepting subsidy applications for leading-edge chip facilities in March. On June 26, it will open applications for “current-generation, mature-node and back-end” production facilities.