The Other CHIPS Acts
The Korean press refers to Yang Hyang-ja, a Korean lawmaker and former executive at Samsung Electronics’ semiconductor business division, as the one who drafted a bill like the U.S. CHIPS Act.
“The winner of the global chip battle will control the economic security order, while the loser will end up becoming a technological colony,” she said.
Seoul offers tax breaks matching those of the United States at a 25% maximum for strategic investments in semiconductors.
South Korea presented a $19 billion package of incentives to bolster its chip sector. Samsung Electronics and SK Hynix were both recipients of these funds, according to Bloomberg news agency. These two companies also received investment pledges from the U.S. government to build facilities in the country.
Meanwhile, Taiwan—where over 90% of the world’s cutting-edge chips are manufactured—announced 25% tax breaks on investments, matching the South Korean and U.S. initiative.
European and other developed countries have all created subsidies to attract chipmakers as well.
The European Union announced a comprehensive package, including $47 billion in subsidies and other stimuli.
While publicly all governments have spoken about diversification and investing in complementary manufacturing stages, the truth is that this game looks like zero-sum competition.
“A plant that you create in Germany, for example, is a plant that you’re not necessarily creating in the U.S.,” said Vishnu Kannan, a former advisor to the president of the Carnegie Endowment and semiconductor industry researcher.
Taiwan has been at the center of the storm. During the drafting of the U.S. CHIPS Act, the rationale behind this bill included a hypothetical invasion of the island and a complete disruption of the AI-enabling components manufactured by the Taiwan Semiconductor Manufacturing Company (TSMC).
“Right now, the United States buys 92% of its leading-edge chips from TSMC in Taiwan,” said U.S. Commerce Secretary Gina Raimondo. A disruption in deliveries “would be absolutely devastating,” Raimondo told journalists in May this year.
This sector accounts for 13 to 15% of the Taiwanese economy, according to the U.S. Trade Commission.
“Certainly, in Taiwan’s case, because this is such a critical national industry, moving leading-edge fabs [chip factories] out of Taiwan, or at least building the next generation of leading-edge fabs elsewhere, is a pretty significant challenge for Taiwanese policymakers who want to continue to ensure that their country is at the center of this value chain,” Kannan explained.
Despite governments competing to offer the most convenient investment terms for major manufacturers, these funds cannot change market cycles, and there’s a real possibility that future decisions from companies, responding to market demand, may hamper policymakers’ plans.
“The fortunes of these companies, and their willingness to sustain long term investments, is entirely dependent on how well their market is doing; and if they choose to scale back, they may scale. There’s always a risk,” Kannan explained.
