Samsung’s Jay Y. Lee walks on tightrope in US, China investments

BEIJING – Samsung Group leader Jay Y. Lee plans to attend the China Development Forum later this month for the first time as the South Korean chipmaker finds itself stuck in a faceoff between the US and China over semiconductor supremacy.

The chairman of Samsung Electronics Co., the world’s largest memory chipmaker and the No. 2 foundry player after Taiwan’s TSMC, is expected to take part in the CDF 2023 scheduled for March 25-27 in Beijing.

The forum, held annually since 2000, brings together high-level Chinese government officials and business leaders from around the world to discuss economic issues. This year’s attendees include Apple Inc. Chief Executive Tim Cook and Pfizer Inc. CEO Albert Bourla, industry officials said.

“The CDF is an event to which the Chinese leadership pays great attention every year,” said one of the people.

At this year's event, new Prime Minister Li Qiang, who is former chief of staff to leader Xi Jinping, is expected to be present and meet with corporate executives from around the world.

During his stay in China, which is Korea’s largest trading partner, he will not only interact with China’s government and business leaders but also inspect Samsung’s local operations.

However, Lee will skip the Boao Forum for Asia, known as the Chinese version of the Davos Forum, scheduled for March 28.

TORN BETWEEN TWO LOVERS

His unprecedented participation in the Chinese forum comes as Samsung and its crosstown rival SK Hynix Inc. are jockeying for position amid an intensifying rivalry between Beijing and Washington over dominance in chip technology.

The Joe Biden administration has been ratcheting up the pressure on its allies, including Korea, to build more chip plants in the US to create jobs for Americans and to keep China’s rising influence in check.

With the US CHIPS and Science Act, Biden promises $39 billion in chip subsidies to US and foreign companies building chip facilities in the country. Tax breaks, however, come with tough conditions such as revealing sensitive business information, often industry secrets, to the US government.

Under the CHIPS Act guidelines, recipients cannot make new, high-tech investments in China or other “countries of concern” for at least a decade if they are to receive US subsidies.

In its efforts to wean Korean chipmakers off Chinese dependence, a senior US government official said last month it may put a cap on technology levels that Samsung and SK Hynix could grow to in China.

The escalating Washington-Beijing rivalry is posing a risk for Samsung and SK Hynix as China plus Hong Kong account for nearly two-thirds of their exports.

SAMSUNG’S CHINA BUSINESS AT STAKE

Samsung is in desperate need of communication with Chinese authorities.

In China, the Korean chipmaker operates a NAND flash memory plant in Xian and a chip packaging facility in Suzhou. It hopes to expand facilities there to meet rising demand from one of its largest chip buyers. Samsung’s Chinese clients include smartphone makers such as Xiaomi, Oppo and Vivo.

Samsung’s Xian plant accounts for nearly 40% of the company’s entire NAND production globally. The company has invested $25.8 billion in its Xian plant since 2021.

Last year, Samsung posted 35.63 trillion won ($27.2 billion) in sales revenue from its Chinese operations.

TO ACCOMPANY YOON SUK YEOL TO US

In late April, Chairman Lee is expected to travel to the US to coincide with President Yoon Suk Yeol’s state visit to Washington on April 26.

As part of Yoon’s economic delegation, Lee will assist the Korean president in negotiations on the Biden administration’s tax incentives and subsidies for chipmakers and battery manufacturers.

Industry officials said the Samsung chairman may also invite the two nations' leaders to an event at Samsung’s new chip foundry plant under construction in Taylor, Texas.

Last November, Samsung announced a $17 billion project to build a foundry factory in Taylor, about 25 km from Austin, where its current contract-manufacturing operations are located.

The $17 billion spending marks the largest-ever investment by Samsung in the US and brings its total US investment to over $47 billion since it began operations there in 1978.

If an event with Biden and Yoon in attendance at the Taylor plant takes place, it would send a positive signal to Samsung’s foundry clients such as Qualcomm and Nvidia, industry watchers said.

Write to Jeong-Soo Hwang and Hyun-Woo Kang at hjs@hankyung.com

In-Soo Nam edited this article.