Pressure on Samsung as Biden says he wants plants in US, not China

It’s official: US President Joe Biden wants semiconductor chips to be produced in his own country, not China, posing a dilemma for foreign chipmakers such as Samsung Electronics, which are torn between two strategically important markets.

Samsung, the only South Korean participant in Monday’s White House meeting on chips, is the world’s No. 1 producer of memory chips used in computers, smartphones and a growing list of smart devices. It is the world’s No. 2 in the foundry business, making processor chips for other companies. The firm operates a massive chip manufacturing plant in Austin, Texas, and has plans to expand a foundry facility in the US.

Monday’s meeting may have been a watershed for the Korean tech giant’s investment plan, industry insiders and pundits said.

Although details of the talks between Samsung and White House officials are tightly sealed, insiders believe an announcement from Samsung is imminent that it will establish a new foundry fab in one of three US states -- Texas, Arizona or New York.

“Since the investment talk was held at the highest level in the US, it could prompt Samsung to finalize its discussions with the three state governments and execute the plan soon,” said an industry insider.

Experts say the White House meeting was not altogether surprising and they take the event seriously, as the US seems to be getting tougher on China, especially as it pertains to supply chains.

“By highlighting the (semiconductor) infrastructure, it is clear Biden wants new cutting-edge manufacturing facilities for chips,” said Kim Yang-paeng, senior research fellow at the Korea Institute for Industrial Economics. “The center of the semiconductor industry is chip fab, and that’s why we say semiconductors are all about equipment.”

“Building the infrastructure of today means the US wants chip fabs with the most advanced technologies in the US, not elsewhere,” he added, referring to a phrase Biden used during the meeting.

Biden, holding up a wafer, said: “These chips, these wafers … batteries, broadband -- it’s all infrastructure. We need to build the infrastructure of today and not repair the one of yesterday.

“The plan I propose will protect our supply chain and revitalize American manufacturing.”

By saying “build the infrastructure of today,” the US president implied he wants more investment in cutting-edge chips by both domestic and foreign companies to increase the volume of chips manufactured in the country, experts said.

Samsung was one of 20 tech giants and automakers invited to the White House meeting, which was attended by the CEOs of top US companies such as Google’s parent company, Alphabet, as well as Intel, General Motors and Ford. Representatives of the Taiwan Semiconductor Manufacturing Co., the world’s top foundry firm, were there too. To better learn what the US is aiming for, Samsung’s foundry business head, Choi Si-young, also tuned into the virtual meeting.

Calling for an increased US presence in the global chip industry, the Biden administration appears to be preparing to expand its current sanctions on China. Some news reports suggested that the US might restrict the entry of deep ultraviolet lithography systems, known as DUV, into China as part of efforts to contain the growth of the Chinese chip industry.

DUV equipment is less advanced than extreme ultraviolet, or EUV, systems -- the most cutting-edge chipmaking systems, which provide the highest yields and efficiency for the advanced and smaller chips that go into premium electronics and mobile devices. The US has already barred China’s access to EUV systems.

“By restricting the equipment imports to China, the US could induce chipmakers to choose the US over China for expansion of their manufacturing at this time of chip shortage,” Kim said.

Korean chipmakers Samsung and SK hynix both operate large-scale memory fabs in China. The DUV ban means the Korean companies might not be able to produce advanced chips in one of their biggest markets, which could lead to decreased profitability.

“The US’ move to increase chip manufacturing in their country is totally understandable, but we are more worried about additional sanctions on China and following impacts on the Korean chip plants there,” another chip industry official said.

It is more difficult for Korean chipmakers to finalize their US investment at this time, considering the growing pressure from their own government, which is encouraging new investments in Korea.

The Korean government is also working on its comprehensive package for the semiconductor industry, which will focus on new investments in the foundry segment.

“This makes it even more difficult for Samsung to decide on the US investment,” an observer said. “Which (between investing in the US and Korea) will give Samsung bigger advantages, help the company cut costs and be in contact more closely with its customers will be considered seriously.” 

By Song Su-hyun (song@heraldcorp.com)