Too early to be relieved, too much homework to do

Competing countries are going all-out to support their chip bases, but our government is just feigning to help.

The U.S. government has decided to waive the federal restrictions on China-bound shipments of U.S. chipmaking equipment for Samsung Electronics and SK hynix in their Chinese operations indefinitely.

In October last year, Washington imposed a set of stringent rules restricting exports of technologies and equipment of U.S. origin for the production of advanced chips to China. Memory giants Samsung and SK hynix were given the one-year grace period. The Korean government has been persuading its U.S. counterpart to extend the waiver. The Korean presidential office said the two Korean memory majors will be designated as the “verified end users” (VEU) who would not need to go through a separate approval process from Washington. The VEU status will free Korean companies from the U.S. export ban, as they would not have to report or seek prior approval to supply factory equipment in China. Samsung Electronics depends on its factory in Xian for 40 percent of its NAND flash output, while SK hynix’s lines in Wuxi and Dalian are respectively responsible for 40 percent of its DRAM and 20 percent of NAND memory shipments. The waiver removes uncertainties about chip operations and upgrades in China.

But the government still has a lot of work to do to ease the burden for Korean chipmakers. The CHIPS Act is composed of a series of regulations. Companies receiving U.S. subsidies for facility investment are barred from expanding their production capacity in China beyond 5 percent for advanced chips — and 10 percent for older technology. The legislation chains chipmakers to sustain operations in China just at the current level. Samsung and SK would have to reexamine their long-term operation in China. The United States will likely toughen export curbs on China since the latest Huawei smartphone was found to have been powered by locally-made 7-nanometer chips.

But Korean chipmakers don’t get due support from their government at home. According to Rep. Yang Hyang-ja, the government has yet to set a budget to build the infrastructure for massive chip clusters in Gyeonggi and Gumi, North Gyeongsang. The Gyeonggi provincial government has asked for 8.6 trillion won ($6.4 billion) and Gumi 3.3 trillion won. Budgeting for other cutting-edge industrial complexes was no different.

President Yoon Suk Yeol said the chip race is a national-level competition. But his commitment is doubted by companies. The Austin city government of Texas supplies the power, water and all other infrastructure for Samsung’s chip factory there, while Samsung only pays for its use. Taiwan also provides the infrastructure for chip facilities for free. Competing countries are going all-out to support their chip bases, but our government is just feigning to help. It can never win the chip war in such ways.