The South Korean government is said to be planning to introduce a comprehensive chip investment and research support plan, surpassing KRW 10 trillion (roughly USD 7.3 billion) in scale, to enhance its position in the critical semiconductor industry, as per a report from Economic Daily News.

According to a statement released by the South Korean Ministry of Planning and Finance on May 12th, Minister Choi Sang-mok stated during a meeting with local chip material, component, and equipment manufacturers that Seoul authorities are preparing a support scheme exceeding KRW 10 trillion in scale to aid all areas of the chip industry, including fabless semiconductor companies, chip materials, manufacturing equipment, etc., with details of this plan set to be announced shortly.

This plan may involve policy financing from the Korea Development Bank and the establishment of new funds through collaboration between state-owned and private financial institutions.

Given that large corporations like Samsung Electronics and SK Hynix already possess substantial resources, the South Korean government’s plan aims to support investments in small and medium-sized enterprises and in the backend process sector. This support will extend to investments in materials, components, equipment, chip design, and packaging processes to nurture the semiconductor ecosystem evenly.

Previously, South Korea announced the development of a large-scale chip cluster in the southern city of Yongin, with a total investment of USD 470 billion, looking to become the world’s largest semiconductor high-tech park.

As the United States and Japan continue to launch subsidy battles to attract semiconductor manufacturers to their respective countries, South Korea is also preparing a response plan.

The US government previously approved subsidies of up to USD 8.5 billion for US chip giant Intel and USD 6.6 billion for TSMC from CHIPs Act to alleviate future semiconductor supply constraints. The US government also announced on April 15th that it will provide up to USD 6.4 billion in subsidies to South Korean semiconductor giant Samsung Electronics for expanding advanced chip production capacity at its Texas plant.

In comparison, figures submitted by a subcommittee under Japan’s Ministry of Finance’s Fiscal System Council show that Japan will invest JPY 3.9 trillion (approximately USD 25.7 billion) over the next three years, equivalent to 0.71% of its GDP.

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(Photo credit: Samsung)

As per a report from Reuters, US Commerce Secretary Raimondo stated on May 8th that the need for the government to take the threat posed by China-produced connected cars more seriously, suggesting potential “extreme action” to restrict or prohibit the import of such vehicles to prevent the leakage of data belonging to US citizens.

Regarding the national security risk investigation launched by Washington earlier this year into Chinese automobiles, Raimondo expressed concerns that Chinese connected vehicles could collect a vast amount of data about Americans, including who they are, what they say in their car, where they go to, as well as their patterns of driving.

Per Reuters, the US administration initiated a review in February this year on whether the import of Chinese automobiles poses a national security risk. Raimondo stated on May 8th that the Department of Commerce is reviewing the public’s comments on this review submitted before April 30th.

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According to sources cited in a report from Bloomberg, the US administration is expected to announce its decisions on tariffs for imported goods from China as early as next week. The tariff decision is anticipated to target key strategic industries, including electric cars, The tariff decision is anticipated to target key strategic industries, such as electric cars, and will reject the across-the-board hikes sought by previous policies.

Bloomberg further indicates that the latest tariff decision is the culmination of a review of the final outcome of the so-called Section 301 tariffs, which were initially implemented during the previous US administration starting in 2018.

The US government is now preparing to impose targeted new tariffs on key industries such as electric cars, batteries, and solar cells. The full decision statement is expected to largely maintain existing tariffs.

Two sources cited by the report stated that the US government plans to announce this tariff policy next Tuesday. The full details are currently unclear.

Regarding this matter, the White House has declined to comment.

Besides the rumored new tariffs, per an announcement of the US government, it indicated that the US government would triple the tariff rate on steel and aluminum imports from China. The US believes it is necessary to strengthen countermeasures against products overcapacity and non-market investments from the Chinese government.

The punitive tariff rate was previously at 15%. In 2020, during the administration of the previous government, it decreased to 7.5% after the US-China trade negotiations reached an agreement. If the rate triples, it will approach the highest level of punitive tariffs, nearly 25%.

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(Photo credit: iStock)

On May 9th, China’s leading semiconductor foundry, SMIC International, announced its financial report for the first quarter of this year. It revealed a revenue of USD 1.75 billion, a year-on-year increase of 19.7%, and a net profit of USD 71.8 million, marking a significant 68.9% decrease compared to the same period last year, falling below market expectations of USD 76.8 million.

According to its financial data, SMIC’s gross profit margin for the first quarter of this year was 13.7%, not only lower than the 16.4% in the fourth quarter of 2023 but also significantly lower than the 20.8% in the first quarter of 2023.

Per a report from Economic Daily News, SMIC’s management stated that global customer’s willingness for restocking had increased in the first quarter, with the company shipping 1.79 million 8-inch equivalent wafers, a 7% increase from the previous quarter. The capacity utilization rate reached 80.8%, up 4 percentage points from the previous quarter.

For the second quarter of this year, SMIC estimates that the early pull-in demand from some customers is still ongoing, with the company giving revenue guidance of a 5% to 7% increase from the previous quarter. With the expansion of production capacity, depreciation is increasing each quarter, the gross margin guidance is between 9% and 11%.

SMIC further indicated that, assuming no significant changes in the external environment for the full year, the company’s goal is for sales revenue growth to exceed the industry average.

In addition, China’s second-largest semiconductor foundry, Hua Hong, also released its first-quarter financial report, with revenue of CNY 3.297 billion, a year-on-year decrease of 24.62%, and a net profit of CNY 220 million, a year-on-year decrease of 78.76%.

Hua Hong estimates that its main business for the second quarter of 2024 will be between USD 470 million and 500 million, with a gross margin of approximately 6% to 10% for its main business.

Regarding the development of China’s foundry industry, TrendForce previously reported that from 2023 to 2027, propelled by policies and incentives promoting local production and IC development, China’s mature process capacity is anticipated to grow from 29% this year to 33% by 2027. Leading the charge are giants like SMIC, HuaHong Group, and Nexchip. Globally, the ratio of mature (>28nm) to advanced (<16nm) processes is projected to hover around 7:3.

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(Photo credit: SMIC)

According to a report from Bloomberg, Intel, the chip giant, expects its revenue for the current quarter to be impacted after the US government revoked chip sales licenses to Huawei. Intel estimates that its revenue for the second quarter of this year will be below USD 13 billion, though still within the previously projected range of USD 12.5 billion to 13.5 billion. The company’s full-year financial forecast remains unchanged, with both revenue and profits expected to grow.

The U.S. government has reportedly revoked the licenses of Intel and Qualcomm to supply semiconductor chips used in laptops and handsets to Huawei. According to Reuters citing sources, some companies received notices on May 7th, and the revocation of the licenses took immediate effect.

Huawei unveiled its first AI notebook last month, which is powered by Intel chips. This has sparked dissatisfaction among some US lawmakers, who have called for the revocation of related export licenses.

In 2019, the US government added Huawei to the “Entity List,” prohibiting suppliers from providing goods to Huawei without an export license. However, US suppliers such as Intel and Qualcomm were granted permission to continue supplying certain chips to Huawei, including central processors for laptops and 4G smartphone chips.

Amid the escalating US-China tech war, these export licenses have allowed some companies to maintain stable revenue from the Chinese market.

Huawei has become the epicenter of the US-China trade conflict, with the US restricting Huawei’s access to Qualcomm’s latest 5G chips and implementing comprehensive controls on NVIDIA’s AI chips, limiting Huawei’s business growth. On the other hand, China has initiated countermeasures, demanding the telecom industry to cease using foreign chips by 2027.

The US Republican Representative Elise Stefanik believes that revoking the licenses will strengthen U.S. national security, protect U.S. intellectual property rights, and thus weaken the technological advancement capabilities of communist China.

Akash Palkhiwala, Qualcomm’s CFO, stated in early May that as the Chinese telecom industry shifts towards 5G development and stops procuring Qualcomm’s approved 4G chips, the company anticipates earning no revenue from Huawei by 2025.

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(Photo credit: iStock)