South Korean media: [Editorial] The US has proposed a "semiconductor tariff bill," and the South Korean government must respond with full effort

Summary: US Commerce Secretary made a firm statement, "If not produced in the US, 100% tariffs will be imposed";

Taiwan region invested 50 billion US dollars to invest in the US to obtain duty-free quotas

Currently, the outline of the US semiconductor tariff pressure is becoming increasingly clear, with its core logic being the deep integration of semiconductor tariffs with investments in the US. On the 16th, US Commerce Secretary Howard Lutnick clearly stated at the groundbreaking ceremony for Micron Technology's new factory in the US, "The only two options for memory chip companies are either pay 100% tariffs or produce in the US." This "no production, heavy tax" kind of ultimatum is forcing global semiconductor companies into a severe survival crisis.

The strategic intention of using tariffs as a lever to induce semiconductor capacity back to the US is fully reflected in the "US-Taiwan Agreement" announced on the 15th. It is reported that Taiwan has pledged a total investment of 50 billion US dollars to the US, including a massive additional investment of 25 billion US dollars by TSMC. In exchange, the US granted it a "duty-free quota for semiconductors," forming an interest-locking mechanism where "the higher the production in the US, the more tariff exemptions."

The concern of South Korea lies in the possibility that the Taiwan agreement model may become a "benchmark" for the US to export to other countries. Although South Korea and the US had previously included the principle of "treatment of South Korea shall not be worse than that of Taiwan" in the semiconductor tariff negotiation documents, this most-favored-nation clause has now easily become a "boomerang" that hinders South Korea's industry. If the US applies the logic of "complying with Taiwan's standards" in subsequent negotiations and forces South Korea to match the investment scale of Taiwan, the South Korean semiconductor industry will fall into a huge uncertainty black hole. Currently, Samsung Electronics and SK Hynix have invested 37 billion US dollars and 3.87 billion US dollars respectively in the US, which is far behind that of Taiwanese companies. The possibility of further pressure from the US is imminent.

Yesterday, the Blue House responded to this issue, stating that it would "strive to minimize the damage to South Korean companies based on the principle of 'not less than treatment' agreed upon between South Korea and the US." However, the semiconductor industry structure and characteristics of South Korea and Taiwan are different, and it is impossible to treat the vague "standard equivalent to Taiwan" as the ultimate goal of negotiations. More importantly, we must be vigilant against adopting a weak attitude of "quitting disputes" and damaging national core interests. Considering the sharp increase in demand for chips in the US, if the Trump administration rashly wields the tariff stick, it will also face the constraint of increasing its own costs. Therefore, the South Korean government should form a community of shared interests with the semiconductor industry and deal with the situation with more precise and cold strategies.

Currently, semiconductors account for 30% of South Korea's exports and are the second-largest pillar of trade with the US. In the context of traditional industries such as petrochemicals and steel gradually losing momentum due to China's strong competition, semiconductors have become the only competitive industry left for South Korea on the international stage. Moreover, with the continuous drain of investment in the US, the instability of the foreign exchange market and the sense of crisis of industrial hollowing are also intensifying simultaneously.

As an "island" actually supporting South Korea's economy, if South Korea loses the initiative in semiconductor negotiations and allows the US to lead the way, the future of South Korea's economy will be hard to remain optimistic.

Source: JoongAng Daily

Original article: toutiao.com/article/1854746339252232/

Statement: The article represents the views of the author himself