At stake is US$350 billion in investment from South Korea and the United States. South Korea is worried about

# Global Times

The U.S. has warned South Korean semiconductor companies that they could face tariffs of up to 100% if they fail to invest in building factories in the United States. However, against the backdrop of unstable tariff expectations and the current sharp depreciation of the South Korean won, the South Korean Ministry of Economy and Finance stated that large-scale investments in the U.S. are "unlikely to start in the first half of this year".

The prospect of South Korea's investment in the U.S. has once again become uncertain. U.S. Secretary of Commerce Howard Lutnick sent a tough tariff signal targeting major semiconductor manufacturing regions on the 16th local time, warning that relevant enterprises may face a maximum 100% tariff on semiconductors if they do not invest in building factories in the U.S., triggering high alert in South Korea's semiconductor industry. South Korean public opinion holds that although the U.S. statement did not name specific production regions or enterprises, the target is clear. Amid rising uncertainty over tariff policies, the pace of semiconductor investment in the U.S. is unlikely to pick up significantly in the short term. Meanwhile, Reuters quoted South Korea's Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho on the 16th as reporting that the $350 billion South Korean investment in the U.S. agreed in previous South Korea-U.S. trade negotiations is "unlikely to start in the first half of the year". The sharp depreciation of the won has made government officials worried about large-scale capital outflows.

## Lack of Clear Rules as Core Concern

According to a Bloomberg report on the 17th, Lutnick stated at the groundbreaking ceremony of a new factory of U.S. memory chipmaker Micron near Syracuse in northern New York State that enterprises planning to produce memory semiconductors have "only two options": either pay a 100% tariff or manufacture locally in the United States. Bloomberg analysts believe that the potential tariff mechanism proposed by the Trump administration in its previous trade deal with Taiwan, China is likely to be replicated and applied to South Korean semiconductor companies.

South Korea's *Hankook Ilbo* reported that the Trump administration put forward the idea of imposing a 100% tariff on all semiconductors imported into the U.S. in August last year. Although the full implementation was later suspended, the policy tool was not abandoned. Instead, the U.S. shifted to using tariffs as a core bargaining chip to negotiate with major semiconductor exporting countries on expanding investment in the U.S. Lutnick's reaffirmation of the "100% tariff" this time is a continuation and escalation of the U.S. strategy to leverage tariffs to drive capacity reshoring.

Against this background, the latest U.S.-Taiwan trade deal is regarded by South Korean media as an important reference. South Korea's *JoongAng Ilbo* analyzed that Taiwan, China exchanged large-scale semiconductor investment in the U.S. for tariff preferences, with leading foundry TSMC expanding its local production capacity in the U.S., and the U.S. granted it tax exemption quotas during the construction and production stages. South Korean media generally believe that this model reflects the U.S. intention to bind overseas semiconductor capacity through tariff leverage.

In contrast, the lack of clear rules on semiconductor clauses between South Korea and the U.S. has become the core concern of the South Korean government and enterprises. According to South Korea's *Chosun Ilbo*, South Korea agreed to apply a 15% tariff rate to most goods exported to the U.S. in last year's South Korea-U.S. trade negotiations, but the semiconductor clauses have not been finalized. South Korea only obtained a principled commitment that it "will not be treated less favorably than other competing regions". Multiple South Korean media pointed out that such an arrangement without clear rules fails to provide stable expectations; instead, it may amplify uncertainty in subsequent negotiations and restrict corporate investment decisions.

## Medium- and Long-Term Pressures Accumulating

South Korean media reported that in terms of short-term actual impact, the current U.S. tariff measures are unlikely to directly hit South Korea's semiconductor exports to the U.S. According to analysis by the South Korean industry, the 25% tariff imposed by the U.S. on some high-performance semiconductors only applies to products that are "imported and then re-exported", while semiconductors supplied to U.S. local data centers, public sectors and industrial ends still maintain a duty-free status.

South Korea's *Korea Economic Daily* reported that South Korea still holds a technological edge in AI-related memory sectors, which is regarded as one of the important bargaining chips for South Korean enterprises when assessing tariff and investment risks. From the perspective of trade structure, the proportion of South Korea's direct semiconductor exports to the U.S. is relatively low, which also weakens the immediate impact of tariffs to a certain extent. South Korea's total semiconductor exports in 2025 were about $173.4 billion, of which exports to the U.S. accounted for only 7.9%. In addition, most of South Korea's memory chips enter the U.S. market through Taiwan, China, mainly supplying AI chips designed by U.S. companies and manufactured by Taiwanese enterprises. The impact of U.S. tariff hikes is more reflected in price transmission, and it is difficult to directly affect enterprises in the short term.

However, South Korean media have generally warned that medium- and long-term pressures are accumulating. The *JoongAng Ilbo* pointed out that the U.S. has defined the current tariff measures as the "first phase" and clearly hinted that they may be expanded to a wider range of semiconductors and their derivative products in the future.

Many industry insiders said that the core concern is that U.S. policy uncertainty may disrupt established business rhythms and global capacity layout. Some opinions pointed out that in the worst-case scenario, South Korean enterprises may be required to match the additional investment scale of Taiwanese enterprises, which will not only significantly increase capital expenditure pressure but also squeeze the resource space for core technology research and development. A semiconductor industry insider told a special correspondent of the *Global Times* that the volatility of U.S. semiconductor policies is forcing South Korean enterprises including Samsung Electronics and SK hynix to maintain a high degree of flexibility in the pace of additional investment, capacity layout and technology investment. In the short term, they are more inclined to postpone major decisions and adopt a wait-and-see attitude instead of aggressive expansion.

## $350 Billion Investment "Unlikely to Start in H1"

Currently, the total investment scale of major South Korean semiconductor enterprises in the U.S. is about $41 billion. Bloomberg pointed out that there remains high uncertainty over whether to further increase investment on the basis of existing commitments.

The South Korean government has also maintained a cautious stance. According to Reuters, the South Korean Ministry of Economy and Finance has clearly stated that large-scale investments in the U.S. are "unlikely to start in the first half of this year". The report said that the annual upper limit of U.S. dollar investment outflows agreed by South Korea and the U.S. earlier is $20 billion, but Choo Kyung-ho said that the initial outflow may be far lower than this figure. Reuters analysts believe that the sharp depreciation of the won has made South Korea worried about such a large-scale capital outflow. "Given the current foreign exchange situation, large-scale investment cannot be made, at least not this year," Choo Kyung-ho said.

According to a Yonhap News Agency report on the 18th, South Korea's Blue House stated that it will negotiate with the U.S. in accordance with the principle of "not providing less favorable treatment than competitors", and formulate response measures based on an analysis of the U.S.-Taiwan agreement and opinions from the industry, striving to minimize the impact.

**Source: Global Times**

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