Exempt today, target tomorrow? Why Korea’s chipmakers can’t rest easy

Chyung Eun-ju

Samsung Electronics and SK hynix may have dodged the United States’ sweeping 100 percent semiconductor tariffs, but exemptions are not forever. In the high-stakes race for chip dominance, today’s diplomatic reprieve could become tomorrow’s bargaining chip.

The U.S. may need South Korea’s advanced chipmaking now, but as supply chains shift and domestic production ramps up, the balance of power could change overnight. For Korean chip giants, the question isn’t just how to celebrate this win — it’s how to prepare for when the rules inevitably change.

Today, semiconductors are an essential part of our daily lives — powering everything from cellphones and computers to cars, airplanes, factories and even finance. They are the backbone of modern industry. Once a global leader, the U.S. used to produce nearly 40 percent of the world’s chips. Today, it makes up just 10 percent, and advanced chips under 7 nanometers are almost entirely produced in Taiwan, with South Korea manufacturing only about 8 percent. TSMC, the global leader in the field, controls roughly 90 percent of the most advanced chip production.

Joel Cho

Just a few years ago, the pandemic revealed the risks of this dependence: Car production lines halted, electronics shipments were delayed and prices soared because supply chains could not keep up. It also underscored how deeply advanced chips underpin every sector of the modern economy, from automotive and consumer electronics to health care and national security. Shortages made clear that semiconductors are no longer just a niche component but a critical infrastructure resource, and governments and industries alike began to treat access to cutting-edge chips as essential for keeping economies running and daily life connected.

For decades, U.S. policymakers assumed offshoring was inevitable. The hollowing out of the Rust Belt, once home to thriving factories, left the country dependent on overseas production — a vulnerability that became painfully clear during the pandemic. This context helps explain why semiconductor policy has become a national priority.

Under both the Donald Trump and Joe Biden administrations, semiconductors have been treated as both economic and strategic assets, central to national security. Chips power defense systems, artificial intelligence (AI), 5G networks and countless critical technologies, making industrial policy a matter of geopolitics as much as economics.

The CHIPS and Science Act reflects this strategy. A $52.7 billion industrial initiative — including $39 billion in grants and a 25 percent investment tax credit — is designed to restore U.S. manufacturing, build domestic supply chains and strengthen national security. The law incentivizes private investment while cultivating local skills and supplier networks around large fabs. As Biden stated in his 2023 State of the Union address, “We’re making sure the supply chain for America begins in America.” The U.S. government is effectively creating “Silicon Heartlands” across the country to revive its global leadership in semiconductors.

Yet recent reports suggest Washington may be moving toward even more direct measures. The Trump administration reportedly considered converting semiconductor subsidies into equity stakes for foreign companies building U.S. facilities, following a similar plan to Intel. Samsung, investing $51 billion to build a foundry in Taylor, Texas, with $6.5 billion in subsidies, and SK hynix, investing $5 billion in Indiana while receiving $630 million in support, could theoretically be subject to a similar approach. While unprecedented and uncertain in feasibility, this very suggestion signals intent to exert influence over global chip production.

For U.S. policymakers, this approach serves multiple purposes: reshaping supply chains, securing domestic access to advanced manufacturing and bolstering economic security by tying strong foreign players to U.S. interests. But for Korean companies, it raises familiar dilemmas. Today’s exemption could quickly become tomorrow’s leverage or pressure point. Partial ownership would give the U.S. influence over strategic decisions, potentially affecting long-term investment returns, production priorities and even control over intellectual property.

The stakes are high. TSMC dominates advanced chipmaking, producing nearly all cutting-edge logic chips, while South Korea excels in memory chips and certain high-end logic components. The concentration of production overseas leaves the U.S. reliant on foreign suppliers, heightening the importance of reshoring. Korean companies benefit from subsidies and market access, but they must also navigate the risk of government intervention and strategic influence in their U.S. operations.

Beyond strategy, these investments have tangible economic effects. For example, Intel’s Columbus, Ohio, facilities are projected to create 10,000 jobs, many paying around $130,000 annually without requiring a college degree. Samsung and SK hynix’s U.S. operations promise similar benefits, boosting local economies, supporting suppliers and creating a skilled workforce. But these opportunities come with some strings attached: Partial government ownership or operational influence could limit autonomy and long-term planning.

With the South Korea-U.S. summit over, companies like Samsung and SK hynix must weigh investment incentives against potential strategic exposure. The U.S. has benefited from South Korea’s chips so far, but the geopolitical landscape is shifting rapidly. AI, electric vehicles, 5G and other high-demand technologies will drive even higher semiconductor needs, meaning today’s exemptions may be tomorrow’s bargaining chips.

Semiconductors are not just another industry. They are a critical nexus of technology, economics and national security. For Korean companies, the stakes could not be higher: Building factories in the U.S. brings subsidies, market access and influence — but it may also involve trade-offs that reshape autonomy and strategy for years to come. In a global semiconductor landscape defined by scarcity, technological edges and geopolitical competition, the lesson is clear — being exempt today is no guarantee of being left untouched tomorrow.

Chyung Eun-ju (ejchyung@snu.ac.kr) is a tech research associate at Donghyun ASP. She earned both her bachelors in business and masters in marketing from Seoul National University. Joel Cho (joelywcho@gmail.com) is a practicing lawyer specializing in IP and digital law.