What U.S.' tariff push means for Korea's semiconductor industry
John B. Quinn
U.S. Commerce Secretary Howard Lutnick’s recent comments on semiconductor tariffs were clear: Build in America, and you won’t pay. If not, expect to pay to enter what he called “the greatest market in the world.” He also pointed to the administration’s approach to pharmaceuticals as a model, with 100 percent tariffs on patented drugs, followed by 100 percent tariffs on generic drugs after two years and 200 percent after three. The strategy is straightforward: threaten tariffs at a level high enough to encourage companies to move production to the United States. For Korea’s semiconductor industry, the question is no longer whether Washington intends to use tariffs as leverage, but how far it is prepared to go.
After four decades representing businesses in high-stakes commercial disputes, including trade and tariff litigation across multiple jurisdictions, I have seen how quickly a government commitment can evolve into a legal problem. The current situation facing Samsung Electronics, SK hynix and Korea’s broader semiconductor industry now risks escalating in the same way.
The 25 percent tariff established under Presidential Proclamation 11002, effective January 15 this year, followed a Commerce department finding that semiconductor imports threatened U.S. national security. The proclamation directed the U.S. Trade Representative and Commerce department to negotiate with key countries in the chip supply chain, which led to negotiations with Korea. Lutnick has since warned that Korean and Taiwanese semiconductor companies that do not invest in the United States could face tariffs of up to 100 percent. He agreed with a Bloomberg host that Samsung and SK hynix were “on notice.” This is a clear warning.
The real issue for Korean companies is not the tariff rate, but the different terms Taiwan negotiated. Taiwan’s agreement links tariff exemptions directly to investment in U.S. manufacturing. Companies building new semiconductor capacity in the United States can import significant volumes duty-free both during construction and once production begins. Because those exemptions are tied to each company’s own U.S. operations, the Taiwan Semiconductor Manufacturing Company (TSMC), which has committed around $250 billion in U.S. investment, can use that preferential access to strengthen relationships with key customers. The benefit extends beyond lower tariff costs, giving TSMC an advantage over competitors without similar U.S. production.
Korea’s position is different. The November 2025 joint fact sheet says Korea will receive tariff terms “no less favorable” than those offered under future agreements covering comparable chip trade. That sounds reassuring, but the language is less certain than it appears. Korea secured a promise of comparable treatment, but not the specific tariff exemptions Taiwan received. Samsung and SK hynix have no U.S.-based memory manufacturing, making it unclear how Korea would qualify for the same production-linked exemptions.
There is a useful and sobering precedent. Korea negotiated an exemption from U.S. steel tariffs back in 2018, only for the Donald Trump administration to revoke it in 2025 with 30 days’ notice. Political commitments can change quickly. Korea’s current semiconductor arrangement is not a binding treaty, making it difficult to enforce in U.S. courts if policy shifts.
Korea’s exposure extends well beyond direct chip exports to the United States. Much of Samsung’s and SK hynix’s advanced memory is first shipped to Taiwan for packaging into artificial intelligence servers before ultimately reaching American customers. If tariffs expanded beyond chips to products such as servers, laptops or gaming consoles, Korean companies could face far broader disruption than today’s measures suggest.
Broader measures would also invite legal challenges. Recent litigation over steel tariffs has shown that companies are often more successful in challenging how they are implemented than the president’s underlying authority to impose them. If semiconductor duties are expanded through informal administrative guidance, similar challenges are likely to follow.
Many Korean chipmakers are already adapting. Some are shortening supply agreements, changing pricing mechanisms and introducing minimum-price protections. Companies with existing long-term contracts should now review tariff allocation and price adjustment clauses carefully. Under U.S. law, higher tariff costs are generally treated as a normal commercial risk rather than a force majeure event.
Despite the pressure from Washington, Korea retains significant bargaining power. SK hynix held more than 56 percent of the high-bandwidth memory market in the first quarter of 2026, while the top three memory producers account for over 90 percent of global DRAM revenue. There is no domestic U.S. substitute. In June, trade associations warned Lutnick and Treasury Secretary Scott Bessent that shortages in the memory chip market could disrupt large parts of the U.S. economy. Washington needs what Seoul makes, and Korea should not underestimate the strength of its negotiating position.
Although industry groups lost on the tariff, they secured manufacturing incentives written directly into Proclamation 11052, including duty-free imports during construction under individually tailored onshoring agreements. Korea should now focus on securing clear, written commitments tied directly to investment and production, with terms that leave little room for future reinterpretation.
Korea’s window is now. The administration is still defining its semiconductor tariff policy, and final terms have yet to be announced. For companies to get ahead, they should review contracts, assess tariff exposure by product classification and press for specific, written, enforceable commitments.
Washington needs what Korea makes, but Korea’s leverage is greatest before the rules are finalized, a point Lutnick himself acknowledged when he pointed to pharmaceuticals as a model for using tariff threats to influence investment decisions before companies commit. Korea still has room to negotiate while it remains central to the global memory supply chain, but that window will narrow as the U.S. secures other partners or credible domestic alternatives emerge.
In my experience, the side that prepares early has the most options when conditions change. In the current environment, that may be Korean companies’ greatest advantage.
John B. Quinn is the founder of Quinn Emanuel Urquhart & Sullivan LLP, the world's largest law firm devoted solely to business litigation.