Think tank voices concerns over US government's access to chipmakers' trade secrets

The Korea Times

The Korea Times

Business

Sat, September 23, 2023 | 06:02

Tech

Korean think tank voices concerns over US government's access to Samsung's trade secrets

Posted : 2023-04-14 16:46

Updated : 2023-04-16 16:13

U.S. Secretary of Commerce Gina Raimondo listens during a virtual meeting with Deputy Secretary of Defense Kathleen Hicks, CEO's and labor leaders called to discuss the importance of passing the Chips Act to bolster America's competitive edge at the White House, July 25, 2022. UPI-Yonhap

By Baek Byung-yeul

Samsung Electronics and other chip companies preparing to launch their manufacturing sites in the United States are increasingly concerned about potential negative impacts on national security due to the excessive subsidy application requirements of the CHIPS and Science Act announced by the U.S. government, including the potential risk of technology leaks, according to a think tank here, Friday.

The Korea Economic Research Institute (KERI), a research center under the Federation of Korean Industries (FKI), pointed out four major issues with the subsidy requirements of the CHIPS Act, recently announced by the U.S. Department of Commerce, which could hinder the plans of the chip companies to build chip-making factories there.

The four issues are: allowing access to chip facilities in the newly built factories; sharing excessive profits with the U.S. government; submitting detailed accounting data with Washington and limiting the expansion of factories in China.

"There are growing concerns that the excessive subsidy requirements of the CHIPS Act may have a serious impact on semiconductor companies in Korea that are actively investing in the U.S.," KERI said. "It is argued that the relaxation of the subsidy requirements through cooperation between Korea and the U.S. is necessary."

On March 21, the U.S. Department of Commerce released such details of the proposed "guardrails" for the CHIPS for America Incentives Program, which involves $52 billion in funding, given to firms to build new chip-making facilities. At a time when President Yoon Suk Yeol is scheduled to visit the U.S., April 26, it remains to be seen whether the concerns of the chip industry here can be reflected during a summit with his U.S. counterpart, President Joe Biden.

Among the four issues, KERI raised concerns over "allowing access to chip facilities could cause potential leakage of technology and trade secrets, directly impacting national security as this clause is similar to allowing access to national security agencies such as the Ministry of National Defense."

Sharing excessive profit is also listed as a concern. This condition stipulates that chip companies receiving more than $150 million in subsidies must share up to 75 percent of the excess profits with the U.S. government.

"This restricts a company's inherent goal of pursuing profits and may negatively impact the profitability of investments, as well as raise concerns about the potential leaking of trade secrets when providing data on projected cash flows and rates of return on investments," KERI said.

Samsung Electronics' chip-manufacturing factory in Austin, Texas / Courtesy of Samsung Electronics

The guardrail provision that limits the expansion of factories in China may also negatively impact the productivity and profitability of existing Chinese factories owned by Samsung and SK hynix, which is also considering building an advanced chip packaging plant in the U.S.

Under the new restrictions, chip companies that receive subsidies in the U.S. are banned from expanding semiconductor production by more than 5 percent for advanced chips and 10 percent for older technology in China for 10 years after receiving the benefits.

Samsung operates chip factories in Xi'an and Suzhou in China, while SK has facilities in Wuxi and Dalian. Samsung and SK produce some 40 percent of NAND flash and about half of their global DRAM chips in China, respectively.

"It is necessary to establish semiconductor subsidy requirements based on reciprocity and fairness, in order to promote mutual interests between Korean companies that are expanding investments in the U.S.," KERI said.

baekby@koreatimes.co.kr