'Any chip fabricated in China': How an ongoing U.S. probe threatens Samsung and SK hynix

SK hynix's High Bandwidth Memory 3E at the SK AI Summit 2024 held in Coex, southern Seoul on Nov. 4, 2024 [NEWS1]

 
The U.S. Trade Representative's (USTR) possible move to impose additional tariffs on Chinese legacy semiconductors may put Korean firms, including Samsung Electronics and SK hynix, in a tough position if the nation asks such companies to cooperate.
 
The USTR held a hearing on Tuesday regarding “China’s acts, policies and practices related to targeting of the semiconductor industry for dominance,” and the potential use of Section 301 of the Trade Act of 1974 to impose additional tariffs on Chinese-made chips as a countermeasure. Section 301 allows the U.S. President to “take all appropriate action” to “retaliate” against any moves that burden or restrict U.S. commerce. 
 
The USTR began investigating legacy Chinese chips last December, looking into anticompetitive measures in labor practices, discrimination, government subsidies, state control of private firms and forced technology transfer by the Chinese government.
 
Republican Rep. John Moolenaar of Michigan, chair of the House Select Committee on the Chinese Communist Party, called for tariffs to be implemented on “any chip fabricated in China” that is put into a final product entering the United States, regardless of whether new or legacy — that is, semiconductors that were not constructed on the latest manufacturing processes, commonly 10 years or older and larger than 14 nanometers in size.
 
The view of USTR views comes with the perception that the Chinese legacy semiconductor industry is already threatening the United States.
 
“Tariffs for China, such as 50 percent tariffs, are a step in the right direction, but additional measures are required,” Richard Clemmer, the former CEO of NXP Semiconductors, said during the hearing. “If we don’t act now, we risk losing our U.S. competitive edge in this global market.”
 
The USTR had written that China’s semiconductor share would reach “approximately half of the world’s capacity by 2029” in its notice announcing the investigation.
 
While the Biden administration imposed a 50 percent tariff on all Chinese semiconductors on Jan. 1., the current administration, with a stronger emphasis on protectionism, could impose further tariffs on a wider product range.
 
Such potential actions are worrying Korean firms, as those with factories in China could subject to the tariff.
 
Moolenaar, during the hearing, emphasized “working closely with Japan, Korea and Taiwan to prevent from dumping subsidized chips in the global market” and called for a “united front” in creating a “level playing field.
 
The U.S. Department of Commerce restricted exports of U.S. advanced semiconductor manufacturing equipment to target China’s production of DRAM smaller than 14 nanometers and NAND flash memory with more than 128 layers. Samsung Electronics and SK hynix previously received verified end user status from the U.S. government, permitting limited upgrades to their respective facilities in Xi'an and Wuxi, but the policy change could jeopardize those permits' renewals and, consequently, the projects.
 

BY PARK HAE-LEE [cho.yongjun1@joongang.co.kr]