EU Chips Act potential boon for Korean parts makers: ministry

Seoul to closely monitor protectionist measures; vows full support for exporters

A visitor to the 21st China Beijing International High-tech Expo looks at a computer chip through the microscope displayed by the state-controlled Tsinghua Unigroup project which has emerged as a national champion for Beijing's semiconductor ambitions in Beijing, China on May 17, 2018. (AP-Yonhap)

South Korea's Industry Ministry said Wednesday the European Union's version of the Chips Act could provide as an "opportunity" for Korean manufacturers.

The European Union agreed Tuesday to pass the 43 billion euro ($47 billion) Chips Act aimed at doubling the bloc's share of global chip output, from the current 9 percent to 20 percent by 2030.

Countries around the world, such as the United States, China, Taiwan and South Korea, have been introducing state support programs to strengthen their chip supply chain, as semiconductors have become key elements of national security and economies.

South Korea's Ministry of Trade, Industry and Energy said the envisioned European law would likely create more competition in the global chip market, but that it would have minimal impact on Korean chipmakers for now.

"For now, we see the EU Chips Act does not contain a provision that can be discriminatory to foreign companies. And because Korean semiconductor firms do not have manufacturing facilities in Europe, the industry estimates that the direct impacts will be minimal (for Korean companies)," Seoul's industry ministry said.

While predicting that the competition in the global chip market would intensify if the European Union boosts its chip production, it could also provide opportunities for Korean companies, the ministry said.

"The European Union's attempt to increase chip manufacturing on its soil could provide as an opportunity for Korea's material, parts and equipment companies to expand their exports," the ministry said.

The European Parliament, the Swedish Council presidency and the EU Commission agreed on the terms of the deal Tuesday.

While Europe has the third-biggest consumer market for chips, after the US and China, the bloc has struggled to secure less than 10 percent of the global output, as chip businesses there are largely fabless companies that only design chips. The fabless companies would outsource fabrication to specialized foundries, such as Taiwan Semiconductor Manufacturing Corp. in Taiwan and Samsung Electronics in South Korea.

"This will allow us to rebalance and secure our supply chains, reducing our collective dependence on Asia," Thierry Breton, the EU's industry commissioner, said in a statement after the agreement.

Under the envisioned law, the EU aims to use the funds for public and private investment to increase its chip design capacity and research and development.

The funds would also be used to provide subsidies for companies that plan to build production facilities in Europe, but the facilities would have to be "first-of-their-kind" in the EU. The bloc also seeks to introduce a monitoring and crisis management system over its chip supply chain.

South Korea's Industry Ministry said it would communicate with Korean chipmakers, closely monitor the EU's legislation process and analyze the potential impact of the European act on Korean companies to come up with response measures.

“When necessary, we will reach out to the European Union for consultation, to minimize the burden Korean companies may face and maximize opportunities,” the ministry added.

By Jo He-rim(herim@heraldcorp.com)