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Chip summit

Samsung walks tightrope on US investment; invited to White House talks

By Apr 12, 2021 (Gmt+09:00)

A researcher at a Samsung Electronics chip cleaning room 
A researcher at a Samsung Electronics chip cleaning room 

Samsung Electronics Co., the only South Korean company invited to a special White House meeting on the global semiconductor shortage, is likely to face pressure over its US investment plans as the Joe Biden administration pushes for more chip production in America.

The US president has convened a summit of 19 major global companies at the White House on Monday (US time) to discuss how to cope with the ongoing chip shortage that has particularly roiled the automotive industry.

The meeting, billed as the “CEO Summit on Semiconductor and Supply Chain Resilience,” will be led by White House National Security Advisor Jake Sullivan and National Economic Council Director Brian Deese, signifying the urgency of the US administration to address the worsening situation.

Samsung is the only Korean company invited to the summit, alongside other global chipmakers such as Intel Corp., Micron Technology Inc., Taiwan Semiconductor Manufacturing Co. (TSMC) and the Netherlands’ NXP Semiconductors.

Also invited are the three largest US automakers, including GM and Chrysler-parent Stellantis NV, as well as tech giants including Google-parent Alphabet, Dell Technologies and HP.

The White House meeting comes as several industries are reeling from depleting semiconductors. Automakers, in particular, have felt the impact of the shortage, causing them to idle some of their production capacity.

Samsung Electronics Vice Chairman Jay Lee visits a chip plant construction site in Pyeongtaek in January.
Samsung Electronics Vice Chairman Jay Lee visits a chip plant construction site in Pyeongtaek in January.

TOUGH DECISIONS

Analysts say Samsung, the world’s top memory chipmaker and the No. 2 foundry player after TSMC, will likely come under pressure to make a quick decision on its planned investment in the US, as President Biden wants foreign chipmakers to build more factories in the country and create jobs for Americans.

Samsung is currently considering investing $17 billion to build a new chipmaking plant close to its existing factory in Austin, Texas. In return for the plant, the Korean chipmaker is seeking tax breaks of $805.5 million from the state government of Texas. The company, which is also looking at alternative sites in the US, including Arizona and New York as well as in Korea, said nothing has been decided yet.

Industry watchers said following the White House meeting, Samsung may be forced to make a decision on its new US factory sooner than expected and push to build a production line for automotive chips given the dire shortage of such chips in the US.

But building a chip plant for automakers could be out of sync with Samsung’s expansion plans as automotive semiconductor chips are less profitable than those for wider applications, including computers, they said.

“Samsung aims to expand its foundry business with extra factories in the US to better compete with its bigger rival TSMC. If Samsung is asked to build an automotive chip plant, it will pose a headache for the company,” said a semiconductor industry official.

From Samsung, Choi Si-young, its foundry business chief, is known to be attending the White House meeting through a video conference.

Chinese Premier Li Keqiang visits Samsung Electronics' Xian chip plant in 2019.
Chinese Premier Li Keqiang visits Samsung Electronics' Xian chip plant in 2019.

TORN BETWEEN US, CHINA

Samsung may also have to walk a fine line between the US and China if the US government ramps up pressure for another round of investment into chip fabrication plants in the US.

In China, the Korean chipmaker operates a NAND flash memory plant in Xian and plans 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 could also be asked by the Chinese government to build more chip plants in China, industry officials said.

The US has been trying to boost its domestic chip production to counter China’s rising influence. As part of such efforts, Intel announced a $20 billion investment plan last month to build two new chip manufacturing factories and also jump into the foundry business.

Earlier this year, the US Congress passed the CHIPS for America Act, aimed at providing billions of dollars in incentives for semiconductor R&D and production in the US, as Washington takes other key steps to bolster its chip manufacturing and supply chains.

Korean chipmaker executives attend a meeting presided over by Industry Minister Sung Yoon-mo in March.
Korean chipmaker executives attend a meeting presided over by Industry Minister Sung Yoon-mo in March.

KOREAN STATE ASSISTANCE REQUESTED

As the chip shortage emerges as a global challenge, the Korean government also convened a meeting of executives from domestic chipmakers earlier this month.

At the meeting, presided over by the Minister of Trade, Industry and Energy Sung Yoon-mo, senior executives from Samsung and SK Hynix Inc. requested more government support and incentives for local suppliers.

The Korea Semiconductor Industry Association urged the government to raise the tax credit to 50% from the current 3% for investments linked to R&D and manufacturing facilities.

In response, Minister Sung said the government will soon come up with comprehensive measures to reflect chip industry demand in state policy.

Write to Jeong-Soo Hwang at hjs@hankyung.com

In-Soo Nam edited this article.

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