Trump putting chip industry on toes

By Kang Seung-woo

U.S. President Donald Trump’s series of tariffs on imported goods is igniting concerns the unprecedented protectionist move may expand to Korea’s chip exports to the United States.

Local semiconductor makers Samsung Electronics and SK hynix are the runaway leaders in terms of technology and the nation’s chip export dependence on the U.S. market has been declining, so there would be no immediate impact on the industry.

However, given the Trump administration’s strong trade stance -- which is feared to lead to a global trade war -- the government is required to remain alert over any possible trade-related developments.

The chip sector is shouldering the nation’s exports as shipments of semiconductors soared 40.8 percent year-on-year to a monthly record $9 billion (9.7 trillion won) in February, sparked by sales of high-value memory chips and storage devices.

In January, Trump imposed tariffs of up to 50 percent on imported washing machines and a 30 percent duty on imported solar panels, followed by last week’s announcement he plans to impose a 30 percent tariff on imported steel and a 15 percent tariff on imported aluminum.

Despite growing concerns over his intensifying trade talk, it is a silver lining that Korea has witnessed its chip exports to the U.S. decreasing in recent years.

In 2000, the U.S. was the largest chip importer, accounting for 30.4 percent of Korea’s chip exports, but the number dipped to 3.4 percent in 2017, according to the Korea International Trade Association (KITA).

On the other hand, China has stepped in for the U.S. and become the biggest buyer of Korean chips, importing 40.2 percent of all products last year.

Following China, the remaining top five destinations are Hong Kong at 27.7 percent, Vietnam at 9.4 percent, Taiwan at 4.5 percent and the Philippines at 4.4 percent. The U.S. came in sixth.

In the time of the Fourth Industrial Revolution featuring big data, cloud computing and internet of things (IoT), memory chips are expected to play key roles and enjoy escalating demand, making it more difficult for the U.S. government to impose steep duties on semiconductors.

“As memory chips are intermediary goods, it is unlikely the chip industry will face heavy tariffs as such a move can impact the cost of final products,” KITA researcher Mun Byung-ki said.

In addition, the World Trade Organization (WTO) Information Technology Agreement eliminates tariffs on most IT products.

However, considering Trump’s recent actions, there are some calls for the Korean government to keep a close watch on trade-related developments.

In particular, it may get involved in patent disputes with Korean makers or put up a de facto trade barrier.

In January, the U.S. International Trade Commission (ITC) said U.S. memory chipmaker BiTMICRO filed a complaint against Samsung, SK and a handful of global companies alleging they violated patents related to solid-state drive (SSD) technology.

The ITC is a quasi-independent federal body that rules on trade violations and SSD is a new-generation storage device that is emerging as a replacement for hard disk drives (HDD) as the former provides a quicker and more stable performance.

"Taking the nature of the industry and the market into account, the U.S. government is unlikely to immediately come up with a so-called tariff bomb," an industry insider said.

"But with unexpected situations occurring, we can only hope the chip industry will not be embroiled in the trade discord between Seoul and Washington."