Amplifying Korean Concerns on CHIPS Act Restrictions

Translating the Chinese Communist Party’s perspective on semiconductors

Korean President Yoon Suk Yeol singing ‘American Pie’ at the White House

Chip Capitols’ off-week deep-dive into Chinese media examines the CCP’s coverage of South Korean concerns with the US CHIPS and Science Act. This piece comes in light of last week’s State Visit by Korean President Yoon Suk Yeol to the US, and sets the stage for a Chip Capitols article next week comparing the Republic of Korea’s (ROK) and US’s semiconductor incentive programs.

The People’s Daily article below highlights Korean critiques of restrictions in the US CHIPS and Science Act. This commentary is an effort by the CCP to paint American semiconductor subsidies as overbearing and protectionist.

For context, the CHIPS and Science Act of 2022 included stringent requirements for semiconductors companies that receive American manufacturing subsidies. Grant recipients must:

• Not expand production in China for ten years (discussed previously on Chip Capitols);

• Not repurchase stock or issue dividends using CHIPS grants;

• Provide childcare services for both the construction workers and permanent employees of their facilities;

• Share with the US government any revenue that exceeds the grant recipient’s projections by an agreed-upon threshold; and

• Submit to broad reporting requirements for the US government to ensure compliance with grant criteria.

Prior to the more recent responses discussed in the article below, the Korean government officially commented on the CHIPS and Science Act’s restrictions last fall in response to the Commerce Department’s October 2022 Request for Information (RFI).

Since the Commerce Department’s plans for the other four restrictions were not yet clear last fall, the ROK’s prior comments focused on the China guardrails. The Korean government said the guardrails “should not be implemented in a manner that excessively restricts the investment or operation of recipient companies, and it should be implemented in a manner that ensures the stability of global supply chains.”

More recently, South Korea’s Trade, Industry and Energy Minister Lee Chang-yang criticized the CHIPS Act’s requirements for being “too wide in range” and “far from general qualifications for industrial subsidies and business incentives.” These comments form the basis of the CCP’s commentary here.

The article I translated below appeared in the Global Times, which operates under the auspices of the People’s Daily 人民日报, the CCP’s official newspaper. Chip Capitols will be back next week with another very exciting article written in collaboration with an incredible classmate of mine, Joon Kang. We will take a deep dive into how policy mechanics differ between how the US🇺🇸 and South Korea🇰🇷 direct public funds to their semiconductor industries. The K-Belt Initiative, the Moon government’s chip materials program, the K-Chips Act… We will dive into it all.

[Any mistakes in translation are my own. Bold, bracketed texts are annotations provided for clarity. The original Chinese text is below.]

Korean trade officials complain: US chip subsidy plan "is complex and unusual"

March 9, 2023, 08:59, Source: Global Times

Ren Zhong, Special Correspondent, Global Times

South Korea, an American ally, is dissatisfied with the strict subsidy rules in the US CHIPS and Science Act. Korean trade officials say that the US chip subsidy plan’s requirements “are convoluted and unusual.”

On March 8^th, The Wall Street Journal reported that the CHIPS and Science Act offers subsidies worth billions of dollars in an attempt to attract some of the world's largest semiconductor manufacturers. However, South Korea, which has large chip manufacturers, says that the [CHIPS Act] subsidies come with too many conditions. The Korea International Broadcasting Station said that the American chip subsidy application conditions include disclosing semiconductor facilities to the US government, sharing excess profits, a ten-year ban on investment in China, etc.

On March 8^th, Yang-Paeng Kim, a senior researcher at the Korea Institue for Industrial Economics and Trade, bluntly said, “The so-called profit-sharing clause essentially takes away what the US government has subsidized you with.” He said that the requirement to submit profit estimates and production-related information makes Korean companies feel insecure as these data are considered strictly protected business secrets. He believes that although all subsidies inevitably have prerequisites, "what the US demands may be too much and beyond the necessary scope."

On March 6^th, the South Korean Minister of Trade, Industry and Energy, Chang-Yang Lee, said that the requirements of the $53 billion chip subsidy plan are complex and unusual: “they are completely different from the subsidies we usually provide for foreign investment.” He said that requiring companies to submit information about their management and technology may cause them to face commercial risks. Furthermore, he said the requirement for companies to provide childcare services for employees, combined with rising interest rates and inflation, will push up the already high cost of investing in the US.

In addition, Samsung and SK hynix both have chip fabs in China. If Samsung and Hynix apply for US chip subsidies, they will face new restrictions on expanding their chip fabs in China. The Wall Street Journal stated that South Korea's opposition to chip subsidy terms highlights the challenge the US faces in promoting its domestic interests while persuading allies to counter China. The US granted a one-year waiver for TSMC, Samsung, and Hynix chips, during which they are not subject to restrictions. [See this Wall Street Journal article for more details on the one-year waiver. This waiver relates to US export control rules promulgated in October 2022 restricting China’s access to semiconductors, not to restrictions in the CHIPS and Science Act.] However, Eric Hirschhorn, [former] Deputy Secretary at the US Department of Commerce, said that after the waiver expires, the US may restrict the level of advanced chip manufacturing technology these companies use in China. [I cannot find the quote this is based on, but the underlying claim is accurate.]

An editorial in The Hankyoreh [a Korean newspaper] stated that the US, which has always emphasized its alliances, has pushed South Korea's semiconductor industry into a dilemma. It adds that the Korean government and companies should clearly and firmly raise these issues. According to Yonhap News Agency, from March 8^th to 10^th, the Minister for Trade of South Korea’s Ministry of Trade, Industry and Energy, Dukgeun Ahn, will meet in Washington with senior officials from the US Department of Commerce and the White House. Dukguen Ahn will convey South Korea's concerns to the US side on this trip.

(Editor: Shen Yuhuan, Wu Sanye)

韩贸易官员抱怨：美国芯片补贴计划“要求庞杂且不太寻常”

2023年03月09日08:59  来源：环球网

【环球时报特约记者 任重】美国《芯片与科学法》中严苛的补贴规则让其盟友韩国不满。韩贸易官员称，美国的芯片补贴计划“要求庞杂且不太寻常”。

《华尔街日报》3月8日报道称，《芯片与科学法》以数百亿美元的补贴，试图诱惑世界最大的一些半导体生产商，但拥有大型芯片制造商的韩国表示，相关补贴附加条件太多。韩国国际广播电台称，美国芯片补贴申请条件包括向美国政府公开半导体设施、分享超额利润、十年内禁止在中国投资等。

韩国产业经济贸易协会高级研究员金仰鹏8日直言：“所谓的利润分享条款实质上等于拿走了美国政府通过补贴给你的东西。”他说，提交利润预期和工厂生产相关信息的要求更让韩国公司没有安全感，因为这些信息被视为受到严格保护的商业机密。他认为，尽管所有补贴都不可避免地带有先决条件，但“美国要求的东西可能太多，超出了必要的范围”。

6日，韩国产业通商资源部长官李昌洋称，这项530亿美元芯片补贴计划的要求庞杂且不太寻常，“与我们通常为外国投资提供的补贴完全不同”。他表示，要求企业提交有关其管理和技术的信息可能会导致企业面临商业风险；让企业为员工提供儿童保育服务的要求，再加上不断上升的利率和通胀，将推高在美国本已高昂的投资成本。

此外，三星和海力士都在中国设有芯片工厂。如果三星和海力士要申请美国的芯片补贴，它们在扩大位于中国的芯片生产设施方面将面临新限制。《华尔街日报》称，韩国对芯片补贴条款的抵触凸显出美国在推进其国内利益的同时还要说服盟友对抗中国所面临的挑战。美国给台积电、三星和海力士芯片一年的豁免，在这一年内可不受规定的约束。但是，美国商务部副部长埃斯特维兹称，豁免结束后，美国可能会对这些公司在中国采用的芯片生产技术的先进程度设限。

　　《韩民族日报》社论称，一直强调同盟的美国却将韩国半导体产业整体推向进退两难的困境中，韩国政府和企业应该明确而坚决地提出问题。韩联社称，8日至10日，韩国产业通商资源部通商交涉本部长安德根将在华盛顿与美国商务部和白宫高官会面。安德根此行将向美方转达韩方的担忧事项。

(责编：申玉环、吴三叶)