CHIPS Act money may not be worth the trouble

The United States is pushing foreign chip makers to disclose sensitive business data, including yield rates, to receive subsidies under the Chips and Science Act. So onerous is the requirement that some companies might decide not to apply...

The U.S. President Joe Biden signs the CHIPS and Science Act of 2022, on the South Lawn of the White House in Washington, DC on August 9, 2022. [AFP/YONHAP]

The United States is pushing foreign chip makers to disclose sensitive business data, including yield rates, to receive subsidies under the CHIPS and Science Act.

Onerous is the requirement that some companies might decide not to apply for funding.

The yield rate, the amount of a silicon wafer that is successfully made into dies, is considered a key indicator to determine a chip producer's manufacturing capabilities. It is often confidential.

Other required information includes production capacity for each wafer, operation rates, estimated production yields, semiconductor prices on first-year production, annual production figures and the increase or decrease rate of the cost.

All of the information need to be submitted as Excel files. It can be used to verify the final numbers and the calculation process, the U.S. Department of Commerce announced Monday.

The semiconductor, passed in July, offers subsidies and tax benefits for companies executing semiconductor-related investments in the country.

The companies must disclose the cost of materials, chemicals, human resources, public utilities and research and development. The department also requires the firms to reveal headcounts.

After a general shareholders meeting on Wednesday, SK hynix's Vice Chairman Park Jung-ho said the company is "still reviewing" whether to apply.

Regardless of the subsidy, SK hynix will build a planned chip packaging factory and research center in the United States, which will cost around $15 billion.

Semiconductor specialists say that the U.S. government is asking for too much.

"Semiconductor yields disclosed to the public are mostly ballpark figures, and exact numbers are confidential," according to a chipmaker spokesperson who spoke anonymously. "It's not possible for a company to submit confidential information on an Excel file as if they're reporting to their bosses."

The U.S. government asks for the requested information to collect data on excess profits. The bigger problem is that it can also leak key technologies.

If businesses disclose cost structure, the U.S. government can figure out what kind of technology or semiconductor patterning firms implement, Hwang Cheol-seong, a professor of materials science at Seoul National University, said. "When such confidential knowledge falls into the hands of their U.S. competitor Micron, its impact will be detrimental to large Korean companies."

Sources say that companies might even consider not applying.

"If the requirements are hard to be met, the worst case scenario is that companies might not receive any subsidy," Hwang said.

Applying for the subsidy is disadvantageous from the business management perspective, Kim Doo-sik of Tech & Trade Institute said. "It's a situation where firms need to evaluate what they can gain by giving it all away. Semiconductor demand will rise up to $1 trillion, and domestic companies need to strategically decide what is lucrative in the semiconductor business as they run plants in Korea, China and the U.S."

Last October, the U.S. Department of Commerce mandated companies to acquire approval from the U.S. government to supply their factories in China with technologies for making DRAM memory chips rated 18 nanometers or less and NAND flash memory chips with 128 layers or more.

Samsung Electronics and SK hynix received one-year waivers for the October rule.

"The firms have waivers which end this October, and without them, they cannot upgrade their chip plants in China," Kim Yong-seok, a professor of electronics and electrinal engineering at Sungkyunkwan University, said. "If only thinking from the business level, firms may reject the subsidy offer, but it can also send an unwanted signal that they are on the side of China, so companies need to negotiate the terms with the U.S. to steer toward a direction where they can offer other information besides private information on corporate yields and financial statements."

The Samsung Electronics manufacturing complex in Xi'an, China, supplies 40 percent of Samsung's NAND flash memory products. SK hynix plants in Wuxi, China, make 96-layer and 144-layer NAND flashes and about 45 percent of its DRAMs.

The consensus is that negotiation is the key strategy for semiconductor businesses to thrive.

"Last year, when there was a problem with supply and demand of semiconductors, the U.S. government asked for private information, such as a list of their clients, but the companies managed to wiggle out through negotiation," Kim said. "This situation is similar in the sense that the firms need to persuade the U.S. instead of merely following its requests."

BY PARK HAE-LEE, KO SUK-HYUN AND LEE JAE-LIM [lee.jaelim@joongang.co.kr]