Nam Hyun-woo has worked as a staff writer at The Korea Times since 2013, mostly covering business and politics. He currently belongs to the Business Desk where he covers topics such as emerging tech, AI, ICT and Korea's chaebol community. Prior to joining the team, he was the paper's correspondent for the presidential office of Korea during the Yoon Suk Yeol and Moon Jae-in administrations.
US equity-for-subsidy plan for Samsung faces feasibility doubts
The Samsung semiconductor plant in Taylor, Texas / AFP-Yonhap
By Nam Hyun-woo
Trump administration attempts to bring foreign chipmakers under its influence, experts say
Doubts are rising over the feasibility of the Donald Trump administration’s reported plan to apply its equity-for-subsidy model to not only Intel but also Samsung Electronics and other chipmakers receiving U.S. CHIPS and Science Act subsidies.
Experts and industry officials said Thursday the move seems “preposterous,” noting that the U.S. had already awarded Samsung up to $4.75 billion in direct funding under the act last December. However, they warned that such an unprecedented attempt should be seen as Washington’s bid to bring foreign chipmakers under its influence to regain its leadership in chip manufacturing.
According to recent reports by U.S. news outlets, the Trump administration is seeking an equity-for-subsidy swap model to salvage Intel and wants to expand the model to other chipmakers eligible for incentives under the CHIPS Act.
U.S. Commerce Secretary Howard Lutnick said in an interview on Tuesday (local time) that the U.S. government will deliver the incentive committed to Intel under the previous Joe Biden administration, but “we’ll get equity in return for it.”
This confirmed another report that the White House was discussing a 10 percent stake in Intel in return for a $10.9 billion subsidy, while a third report said Lutnick is investigating how to apply the measure to Micron, TSMC and Samsung Electronics.
U.S. Commerce Secretary Howard Lutnick, right, speaks next to U.S. President Donald Trump, as they make an announcement about an investment from TSMC at the White House in Washington, March 3. Reuters-Yonhap
Intel’s $10.9 billion subsidy amounts to about 10 percent of its $110.8 billion market capitalization. If the same formula is applied to Samsung Electronics, the Trump administration may demand a roughly 1.6 percent stake — a level comparable to that held by its Executive Chairman Lee Jae-yong.
If Samsung were to accept the demand and issue new shares, it could seriously disrupt the company’s already complex ownership structure, as well as dampening the recent recovery of its stock price.
Though Samsung refused to comment on the issue, many industry officials say the move is “preposterous,” because the incentive is a legally guaranteed subsidy in return for Samsung’s semiconductor fab investment in Texas.
“It makes no sense for a government to demand equity from a foreign company,” an industry official said. “This is not just a simple pledge, but financial support included in the CHIPS Act, and rejecting it would be no different from the administration refusing to execute a budget approved by U.S. Congress.”
Korea’s presidential chief of staff for policy Kim Yong-beom also told reporters on Wednesday that “this is groundless, and the companies involved had no knowledge of it,” adding that “the contracts under the CHIPS Act have already been finalized.”
Presidential spokesperson Kang Yu-jung reiterated that statement Thursday. “It seems that various rumors were circulated to gain leverage before the Korea-U.S. summit,” she said.
Another industry official said, “Handing over even a 1.6 percent stake to the U.S. government, even though it is a nonvoting share, would be risky, because it may expose trade secrets, pricing policies and other sensitive corporate strategies.”
Lee Jong-hwan, a professor at Sangmyung University’s Department of System Semiconductor Engineering, also said the U.S. move seems to be “far-fetched,” but stressed the significance of the Trump administration’s underlying intention.
“(The U.S. government’s equity holding in Samsung) would be difficult to carry out and may ultimately be a pressure tactic to reduce subsidies for chipmakers,” he said. “However, the very idea of acquiring a stake should be understood as an attempt to bring one of the world’s most advanced chip manufacturers, which has a cutting-edge 2-nanometer process, under U.S. influence.”
A semiconductor wafer is on display at Touch Taiwan, an annual display exhibition in Taipei, April 16. Reuters-Yonhap
The Trump administration has set a goal of making the U.S. the world’s top semiconductor powerhouse by 2030, particularly emphasizing the need to secure world-class manufacturing capabilities, such as the 2-nanometer process, to reshape the global supply chain in favor of America.
“For Samsung, the subsidies themselves are not the issue. In the scale of the semiconductor market, they are negligible,” Lee said. “What truly matters is building partnerships and securing orders from Big Tech firms through solid relations with the U.S. government. This is especially so these days, when chips are no longer made and offered to customers but are custom-designed based on client orders.”
Samsung recently secured large-scale foundry orders from Tesla and Apple, which are set to be manufactured at its U.S. plants. One of the company's main focuses is now high-bandwidth memory 4 chips, which are custom-made upon clients’ orders, meaning U.S. Big Tech firms remain crucial for the company’s chip business.
“If the U.S. demand were to materialize, equity acquisition would be a highly sensitive issue that Samsung would want to avoid,” Lee said.
“Through out-of-the-box thinking, the company and Korea should negotiate to increase its U.S.-bound investment instead, while asking the U.S. government to provide strong support in connecting it with Big Tech firms.”