'US should ease subsidy requirements for semiconductors and EVs'

From left, U.S. President Joe Biden, President Yoon Suk Yeol, and Samsung Electronics Chairman Lee Jae-yong listen to a worker at Samsung Electronics' third plant in Pyeongtaek, Gyeonggi Province, on May 20, 2022. Yonhap

By Kim Hyun-bin

The U.S. should ease subsidy requirements for semiconductors and electric vehicles (EV) in order to increase mutual benefits between Korea and the U.S., a think tank has suggested ahead of President Yoon Suk Yeol's state visit to Washington at the end of April.

The Korea Economic Research Institute (KERI) under the Federation of Korean Industries (FKI) outlined the “Top 10 Issues for Korea-U.S. Economic Cooperation” by deriving tasks for each major industry for mutual cooperation between the two countries.

KERI pointed out that although the U.S. is increasing the proportion of domestic production in key industries such as semiconductors and EVs, there are many unreasonable requirements for its key ally Korea, which is seen as hindering Korean companies from expanding in the U.S.

"Amid the intensifying competition between the U.S. and China for supremacy, economic and security cooperation with the U.S. is essential for South Korea to jointly respond to threats from China and North Korea," Lee Kyu-seok, an associate research fellow at the KERI, said. “There is a need to expand cooperation so that it can be of mutual benefit between the two countries.”

In the semiconductor sector, KERI suggested an easing of subsidy application requirements, such as allowing access to semiconductor facilities under the U.S. CHIPS Act and sharing excess profits, so that there would be no setbacks in the construction of semiconductor production facilities in the U.S.

Regarding the EV subsidy requirements, meanwhile, the Inflation Reduction Act (IRA) requires conditions that are difficult for companies to achieve in the short term, the think tank pointed out. It suggested that the tax credit requirements should be postponed until 2025 when the construction of Hyundai Motor's Georgia plant is scheduled for completion.

In the case of batteries, the think tank suggested that the two countries could strengthen their dominance in the North American market, as cooperation between domestic battery companies and U.S. global automakers through joint ventures is increasing. It stressed that the U.S. would see the effect of production facility expansions in its own country.

Regarding the display sector, KERI emphasized the importance of Korea-U.S. cooperation in protecting intellectual property rights in order to maintain distance from China's OLED technology.

In addition, KERI pointed out that cooperation between Korea and the U.S. is necessary for the fields of biotech, hydrogen, urban air mobility (UAM), robotics, space, and aviation.