South Korea warns US: The CHIPS Act leaves a sour taste

Minister wants to protect Samsung, SK hynix, from having to give up the crown jewels to score subsidies

The US government's plan to lure more chipmakers to the home of the brave has hit a snag in South Korea. That nation's trade minster is on his way to Washington with a message that some of the program's requirements don't sit well with the likes of Samsung and SK hynix.

South Korean minister Ahn Duk-geun told local media he sees "issues related to demanding too much information."

That's almost certainly a reference to the Notice of Funding Opportunity published on February 28 that spells out the requirements for applying for funding under the CHIPS Act – the US law that proposes tens of billions in subsidies for semiconductor manufacturing on US soil.

Among the requirements are "a detailed description of the core underlying technology and manufacturing processes to be utilized in the facility or facilities for which CHIPS Incentives are sought."

Applicants will also need to submit "a detailed financial model for each proposed project" that details "projected cash flows … including capital expenditures, operating expenditures, revenues, taxes, and terminal values; the capital structure for the facility; internal rates of return and profitability metrics; scenarios under different macroeconomic, market, and operating environments to allow for sensitivity analysis and stress testing; and other information."

Minister Ahn has reportedly expressed concern that those requirements mean applicants for CHIPS Act funding will need to share technology secrets, as well as so much financial information that analysis could deliver valuable competitive intelligence.

The CHIPS Act also mentions profit-sharing, which matters to Korean chipmaking giants Samsung and SK hynix. The former is considering construction of eleven semiconductor fabs in Texas. The latter plans to invest $22 billion in the States.

Neither, presumably, is keen to have US officials able to consider their innermost secrets.

Ahn hopes to win assurances neither Korean company will be at risk.

Both, however, are already upset by the US's semiconductor policies because they limit the extent to which the Korean companies can operate in China – perhaps even imposing quotas on production that can be undertaken in their Chinese facilities.

China and South Korea are firm allies, but the US is asking a lot of its friends as it seeks to restore its dominance of semiconductor manufacturing. The extent of its requests was reflected in extended recent negotiations with the Dutch and Japanese governments.

Both eventually signed up to Washington's plans, further increasing the difficulties China will face as it attempts to develop and manufacture its own semiconductors.

Beijing this week tried to address its silicon challenges with a re-organization of its oversight of R&D efforts, plus newly-vivid rhetoric decrying the US's policies. ®