TSMC's $100 Billion Investment in the U.S.: Implications for Korean Chipmakers

U.S. President Donald Trump recently met with TSMC CEO C.C. Wei at the White House to announce a significant investment plan by the Taiwanese semiconductor giant. TSMC will invest an additional $100 billion in Arizona over the next four years, making this the largest foreign investment from a single company in the United States.

This hefty $100 billion investment builds on a previously committed $65 billion for the construction of three semiconductor factories in Arizona. TSMC's decision puts pressure on Korean tech companies, specifically Samsung Electronics and SK hynix, to consider increasing their investments in the U.S. as well.

In today's competitive environment, there is growing pressure on Korean firms from the U.S. government to "make in America" or face potential disadvantages such as tariffs. Trump's administration has reinforced the notion that these tariffs are more effective than subsidies in attracting foreign investments.

According to U.S. Commerce Secretary Howard Lutnick, TSMC's investment in America symbolizes the influence of Trump's presidency. He stated that TSMC's presence in the U.S. allows them to sidestep tariffs, indicating a shift in how investments are dealt with under the current administration.

During the press conference, Trump highlighted the importance of TSMC's investment in relation to national security. When questioned about the potential risks posed by China, Trump noted that TSMC's efforts could provide the U.S. with a stronger position should tensions rise.

Tsim's investment strategy indirectly increases the pressure on Samsung and SK hynix. Trump has hinted at imposing tariffs exceeding 25% on semiconductor products and re-evaluating subsidies for foreign companies operating in the U.S. This puts Korean companies in a tight spot as they navigate their investments amidst these potential tariff increases.

Industry insiders reveal that Trump appears to be leveraging TSMC's decision to compel Samsung and SK hynix to invest more in U.S. operations, questioning the security of current subsidies promised to them. Despite commitments made under the CHIPS and Science Act, which included $4.75 billion for Samsung's $37 billion investment plan and $458 million for SK hynix's $3.87 billion initiative, there is a growing sense that the U.S. could grow less generous with incentives for foreign investments.

This uncertainty has led to concerns among Taiwanese observers as well, linking Trump's reassurance regarding TSMC's investment to a broader historical context reminiscent of the Budapest Memorandum, which some believe emboldened aggressive action from Russia against Ukraine. There are fears that the guarantees offered to TSMC may not hold up in the long term.

Challenges for Korean Manufacturing Operations

Additionally, both Samsung and SK hynix are reportedly reassessing their manufacturing locations in light of new tariffs imposed by the U.S. on imports from Mexico and Canada. As of now, the U.S. has announced a 25% tariff on all imports from these neighboring countries, effectively complicating the situation for Korean companies that have relied on manufacturing facilities in these regions.

For example, Samsung is contemplating the relocation of its laundry dryer production from Mexico to a plant in South Carolina, which may yield better financial outcomes under the current tariff regime. Likewise, SK On, a division of SK Group that focuses on battery manufacturing, is in the process of building a plant for cathode materials in Quebec, Canada, in partnership with EcoPro, another Korean firm.

However, the future remains uncertain. Some analysts suggest that agreements between the U.S. and Mexico or Canada could emerge, further complicating the decision-making process for Korean manufacturers as they navigate potential changes to their North American operations.

Investment, Semiconductors, Manufacturing