Chip units in China won’t be forced to close

Big expansion: Morris Chang, the founder of Taiwan Semiconductor Manufacturing Co, leaves an event in Taipei. The world’s largest contract chipmaker is investing US$40bil (RM179bil) in a new plant in Arizona and also manufactures in China. — Bloomberg

SEOUL: South Korea’s trade ministry says that the United States’ proposal to prevent US$52bil (RM232.5bil) in chip funding from being used by “countries of concern” will not force recipients to shut down their China factories.

The US Commerce Department on Tuesday proposed limits for recipients of US chip manufacturing and research funding, including limits on investing in expansion in countries such as China and Russia.

The world’s largest and second-largest memory-chip makers, Samsung Electronics and SK Hynix, have chip production facilities in China.

Samsung is building a chip plant in Texas that could cost more than US$25bil (RM111.8bil), while SK Hynix parent SK Group announced last year plans to invest US$15bil (RM67bil) in the US chip industry. Both may apply for funding.

The proposed rules for funding recipients limit chip production capacity growth in China to 5% over 10 years as measured by wafers and 10% for older legacy chips, the trade ministry said.

They do not restrict investments in technology and process upgrades or equipment replacement necessary for the operation of existing facilities, the ministry added.

“For production facilities that our companies are operating in China, it is expected that maintenance, partial expansion, and technology upgrades will continue to be possible,” the trade ministry said in a statement.

“As technology is upgraded, chips per wafer can be increased, which could expand production depending on corporate strategies.”

The South Korean government plans to communicate with the local industry, analyse proposed rules and consult with US counterparts within 60 days, the ministry said.

Uncertainty includes what happens when the one-year waiver for Samsung and SK Hynix to receive chip equipment needed in China expires in October, said an industry source, who declined to be named because of the sensitivity of the matter.

Samsung and SK Hynix said they would review the details of the announcement.

Taiwan Semiconductor Manufacturing Co Ltd, the world’s largest contract chipmaker, which is investing US$40bil (RM179bil) in a new chip plant in Arizona and also manufactures in China, declined to comment on the announcement.

The South Korean ministry noted that Samsung’s recent plan to invest US$230bil (RM1 trillion) in South Korea over the next 20 years to develop a large chip-making base was in line with uncertainties in investing in China or the United States. — Reuters

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