TSMC's $100 Billion US Investment Plan Urges Korean Chipmakers to Act

U.S. President Donald Trump recently met with TSMC CEO C.C. Wei at the White House to discuss TSMC's announcement of a landmark investment plan. The Taiwanese semiconductor company revealed plans to invest an additional $100 billion in Arizona over the next four years. This figure marks the largest investment made by a single foreign company in the United States.

The $100 billion plan adds to the existing $65 billion commitment TSMC has already made for building three factories in Arizona. This ambitious move is putting significant pressure on South Korean companies like Samsung Electronics and SK hynix, who are feeling the heat of Trump's calls for increased domestic manufacturing.

Pressure on Korean Firms

Samsung and SK hynix face a tough choice: either invest more in the U.S. or risk facing hefty tariffs and unfavorable trade conditions. This ultimatum from the Trump administration is reinforced by TSMC's massive commitment, which might indicate a preference for tariffs over subsidies as a way to attract foreign investment.

U.S. Commerce Secretary Howard Lutnick emphasized the significance of TSMC's investment, suggesting that it showcases the effectiveness of Trump's economic strategies to lure top manufacturers to the U.S. At the press conference, Trump highlighted TSMC's involvement as a step toward national security, especially concerning relations with China and Taiwan.

Implications for Subsidies

As Trump hinted at imposing tariffs of over 25 percent on semiconductor products, he also mentioned the potential for cutting back on the subsidies that were promised to Samsung and SK hynix under the previous administration's CHIPS and Science Act. These legal commitments could become less secure under the current political climate.

Chang Sang-sik, head of the Institute for International Trade, warned that if the U.S. reneges on financial incentives for foreign investments, it could create challenges for these companies. The previous administration had approved $4.75 billion for Samsung's $37 billion investment and $458 million for SK hynix's $3.87 billion plan, but that could be under threat.

Challenges in North America

Additionally, both Samsung and SK hynix are re-evaluating their manufacturing strategies in North America. As part of new tariffs imposed on imports from Mexico and Canada, the companies are reconsidering their current facilities there. For instance, Samsung is contemplating moving some production to South Carolina instead of continuing operations in Mexico.

This shifting economic landscape, combined with uncertain government policies, is making it difficult for Korean firms to plan their next moves in the North American market. Proper action and timely investments could be essential for them to navigate through these changes successfully.

TSMC, Samsung, Investment