'Sugar-coated poison pill'

• Published date: 08 March 2023
• Publication title: The Korea Times

The U.S. CHIPS and Science Act has triggered ferocious controversy here, placing major chip firms into a serious dilemma. The Biden administration cannot deflect criticism for demanding seemingly "unfeasible" requirements on the companies winning subsidies by investing in America. Media outlets in the U.S. and its allies such as South Korea and Taiwan are crying foul at the act.

The U.S. has unveiled the act with which it aims to dominate the global semiconductor sector comprising all processes from design through to manufacturing. Yet the ambitious bid has faced a fierce backlash from the beginning.

U.S. President Joe Biden is most accountable for triggering the dispute. The U.S. Department of Commerce announced conditions for subsidies for the $53 billion act late last month.

Under the guidance, the grants should be offered first to firms helping the U.S. to develop state-of-the-art weapons. And the firms receiving more than $150 million will have to pay excess profits (up to 75 percent of the subsidy) to the U.S. administration and offer information regarding their clients, equipment and materials.

The recipients also need to pay wages, abide by rules and set up nursing facilities as demanded by unions. These conditions are not an easy pill to swallow for Korean chip firms. Even the Wall Street Journal (WSJ) of the U.S. published an editorial critical of such a decision, describing it as "progressive priorities via corporations."

As the WSJ put it, we cannot help but doubt the policy was designed to do anything more than maintain the upper hand over China in the lead-up to the 2024 U.S. presidential election. Recipients are prohibited from expanding semiconductor facilities in China in the 10 years to come. The U.S. has cited the need for its policies as being for the sake of its economy and national security while coming up with the subsidy plan.

Yet, the U.S. action will seriously undermine the managerial self-reliance of the relevant companies. And the firms become vulnerable to the possible leaking of key technologies requiring the highest degree of confidentiality. This will eventually deal a fatal blow to their survival. The Biden administration has invited criticism for...