Samsung Electronics in Dilemma
U.S. President Joe Biden joins the U.S. government’s online conference with 19 global enterprises on April 12 (local time). His participation in the semiconductor supply chain conference shows that the United States is regarding semiconductor as a matter of national security rather than just one industrial sector.
After the conference, the U.S. government is likely to put even more pressure on South Korean semiconductor manufacturers to take part in its alliance value chain in the industry. This means those companies now have to make a choice between the United States and China. The burden of Samsung Electronics and SK hynix is increasing in that they have supplied their products to a number of Chinese clients while running semiconductor manufacturing facilities in China.
U.S. Government Regarding Semiconductor Sector as National Security Element
The conference is attended by National Security Advisor Jake Sullivan, National Economic Council Director Brian Deese and Commerce Secretary Gina Raimondo as well as the president. It is said that the security advisor’s seat in the conference is quite unusual and implies how important the industry is to the government.
The United States showed the same stance at the April 2 meeting of the U.S., South Korean and Japanese national security chiefs as well. National Security Advisor Jake Sullivan represented his country at the meeting and stressed the importance of the industrial value chain to be safely maintained by the three countries as leading semiconductor manufacturers.
Call for Plant Expansion in the United States
It is more facilities in the United States that the government is demanding at this moment. This is because plant expansion leads to job creation and more chip supply to U.S. companies.
At present, Samsung Electronics is planning to build a foundry in one of Texas, Arizona and New York by investing at least US$17 billion. The company is currently discussing incentives and so on with each state and may have to put forward its plan if the White House insists. In addition, the White House may urge Samsung Electronics to produce more automotive chips in the United States. In this case, Samsung Electronics may have to change its production strategy in a loss-making way. The company's facilities in the United States are currently producing a small amount of automotive chips in view of profitability and so on.
Samsung Electronics in Dilemma
Samsung Electronics is in a dilemma with the United States setting out to expand its alliance value chain in the industry against China. Samsung Electronics has grown with its production bases efficiently distributed in South Korea, the United States and China. Last year, the company's semiconductor arm posted 31 trillion won in sales in the Chinese semiconductor market, approximately one-third of the arm’s global sales for 2020.
Although the U.S. government is yet to reveal specific demands, Samsung Electronics’ relationship with the central and local governments of China is likely to be affected in that the alliance value chain is against China. “Boycott campaigns led by private organizations with the Communist Party in the background may target Samsung Electronics,” said an industry source, adding, “Still, a sudden plant shutdown is rather unlikely because Samsung Electronics and SK hynix are producing chips for Chinese clients in quantity.”
“The U.S. government is seeing semiconductor as a national security factor and it is almost impossible for Samsung Electronics to say no to it,” he went on to say, continuing, “Samsung Electronics will have to accept the U.S. offer, despite a decrease in sales in China, in order to keep its non-Chinese market shares.”