On Friday, January 16th, U.S. Commerce Secretary Howard Lutnick urged semiconductor companies in South Korea and Taiwan to commit to increasing their production in the United States. He warned that if they do not invest in the U.S., they may face tariffs as high as 100%.
After attending the groundbreaking ceremony for a new Micron Technology plant in Syracuse, New York on Friday, Lutnick mentioned that South Korean chip manufacturers could potentially face similar tariff implications as outlined in the trade agreement reached with Taiwan. He stated, “All companies looking to produce storage chips have two choices: either pay a 100% tariff or manufacture in the U.S.” Lutnick did not name any specific companies but emphasized that this is an industrial policy.
A spokesperson for the U.S. Commerce Department told Bloomberg, “Secretary Lutnick is committed to restoring America’s leadership in manufacturing, starting with the semiconductor industry.”
According to reports from Yonhap News Agency, Trump administration officials indicated that separate agreements were made with each country, and the tariff exemptions granted to Taiwan would not automatically apply to other nations. This means South Korea would need to renegotiate with the U.S. to secure its own chip tariff treatment.
It is widely speculated that the U.S. may use the chip provisions in the trade agreement with Taiwan as a benchmark, placing South Korea in a position to decide between increasing investments in the U.S., expanding manufacturing facilities, and dealing with tariff pressures.
Lutnick emphasized that the U.S.-Taiwan trade agreement aims to provide tariff reductions based on quotas for companies committing to invest in U.S. domestic manufacturing. “If they don’t build factories in the U.S., tariffs could reach as high as 100%,” he told CNBC.
President Trump has temporarily postponed imposing tariffs on most foreign-made semiconductor products and has tasked the Commerce Secretary and U.S. Trade Representative to negotiate reducing America’s reliance on chip imports.
The White House indicated earlier this week that the President may announce new tariffs and corresponding offset plans in the near future to stimulate domestic manufacturing development.
The U.S.-Taiwan trade agreement reached on Thursday lowers tariffs on most Taiwanese goods from 20% to 15%, aligning with rates for South Korea and Japan. In return, Taiwanese chip and tech companies, including TSMC, plan to invest $250 billion in the U.S. for advanced chip, energy, and artificial intelligence (AI) production and innovation capabilities. The Taiwanese government is also providing $250 billion in credit guarantees to assist companies investing in the U.S.
In terms of tariff arrangements, U.S. offers preferential import tariffs on chips for Taiwanese companies. During the construction phase, products up to 2.5 times the capacity are exempt from tariffs, with discounted rates applied to excess production. After completion, products up to 1.5 times the capacity will be tariff-free.
Simultaneously, the Trump administration is ramping up efforts to attract more foreign investments. The U.S. aims to shift 40% of Taiwan’s chip supply chain and output to the U.S. to enhance domestic semiconductor manufacturing capabilities.
Samsung Electronics and SK Hynix in South Korea are competitors of Micron Technology in the high-bandwidth memory chip market. These chips are crucial components driving the thriving data center processors for artificial intelligence. Due to the surging demand for components in AI data centers, all three companies have warned of tight supply in recent months.
As per the agreement between the U.S. and South Korea announced in July, most South Korean goods will face a 15% tariff, with an exclusion for chip imports. This pact includes establishing a $350 billion Korean fund to support U.S. investments, but specifics of these plans are still being finalized. It remains unclear how much Samsung and SK Hynix, apart from previous commitments, will agree to invest in the U.S.
In 2024, Samsung unveiled plans to invest over $40 billion in the U.S., including building an advanced packaging plant for high-bandwidth memory chips in Texas with a $17 billion investment. Meanwhile, SK Hynix intends to invest nearly $4 billion in Indiana for advanced packaging, which is part of its $15 billion investment in production and research in the U.S.