November 28, 2024

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South Korean President Yoon Suk Yeol (left) and US President Joe Biden hold a joint news conference after their summit at the White House in Washington on Wednesday. (Yonhap)

South Korean chip suppliers and automakers have been left unimpressed by the summit between Presidents Yoon Suk Yeol and Joe Biden, after it failed to bring out any tangible measures to ease their concerns over Washington's increasingly protectionist policies.

Holding a joint press conference after their summit on Wednesday, the two presidents announced their agreement on strengthening cooperation in advanced technology sectors, including chips, electric vehicles and batteries.

But they did not refer to any kind of loosening of the Biden administration’s recent policies such as the Inflation Reduction Act and the CHIPS Act that has put increasing pressure on Korean firms to invest more on American soil.

“The Korean chip industry has had low expectations on the presidents announcing some drastic change in the summit. Still, anticipation was high for the leaders to make a little more progress than the win-win rhetoric," an industry official said under the condition of anonymity.

"We will have to wait for further development of their negotiations."

Another industry official raised hopes that the US is sincere in its intentions to not hurt its ally with the chip boost program.

During the press conference, Biden stressed that it is “very much” in the interest of the US for South Korean companies to do well, and that his CHIPS Act is a "win-win" policy.

“(The CHIPS Act) is generating significant economic growth in America and not hurting anybody,” Biden said, when asked about his thought on the concerns that the CHIPS Act is hurting the interest of Korean chipmakers.

His follow-up responses focused on how the CHIPS Act is designed to boost the US' semiconductor industry, and that it has succeeded in attracting investment from Korea.

Biden also said it would create jobs in America and also in Korea, but did not elaborate how the subsidy plan would benefit Korean companies.

“It’s creating jobs in South Korea, not just SK but with Samsung and in other industries,” said the president, referring to Samsung Electronics and SK hynix, the world's No. 1 and No. 2 memory chipmakers in the world, respectively.

Yoon said, “President Biden has said no special support and considerations will be spared for Korean companies’ investment and business activities.”

“We have agreed to consult and coordinate closely so that the US Inflation Reduction Act and the CHIPS and Science Act can further strengthen supply chain cooperation between the two countries in advanced technology," Yoon said.

The CHIPS Act, offering ample subsidies to attract global chipmakers to build semiconductor manufacturing facilities on US soil, has come under criticism from beneficiaries who say the requirements are too strict. The requirements include sharing their excessive profit with the US government, providing their operation plans and limiting them from making investments in China.

Kim Joon-hyung, former chancellor of Korea National Diplomatic Academy, said the summit "avoided the worst case scenario," but that there is still a "minefield" to pass through.

“It does make sense for the US to take protectionist measures against China and want to join hands with its allies sharing the same thoughts, because China is breaking the rules. But then, it should not apply the same protectionism with allies,” Kim said in a radio interview with CBS on Thursday.

“From Korea’s perspective, we invested only to get unfair treatment in trade.”

There have been no further discussions on the Inflation Reduction Act such as offering a longer grace period on applying stricter regulations or leniencies to Korean carmakers who sell electric vehicles in the US.

All Hyundai and Kia EVs are no longer eligible for tax credits in the US, following the announcement from the US Treasury Department on April 18.

“Truthfully, we did not expect there would be a favorable outcome during the president’s visit to the US, because the detailed negotiations between the two countries had been finalized beforehand,” said an industry source familiar with the matter.

In a move to minimize the impact of the IRA, Hyundai Motor Group will be expanding its lease and rental businesses, which are exempt from the regulation, accelerate the construction of an EV plant in Georgia and strengthen business ties with LG Energy Solution and SK On, the source said.

Korean battery makers, on the other hand, consider the IRA as creating growth momentum for their business in North America.

Unlike Hyundai, battery manufacturing companies are already benefiting from the IRA, which requires 50 percent of battery components to be made in the US and more than 40 percent of battery materials to be mined and refined there or in countries with free-trade agreements with the US.

Of the 22 electric vehicles that receive US tax credits, 17 models have installed Korea-made batteries, with LG Energy Solution topping the list with 11 models. Samsung SDI and SK On supply batteries to four models and two models, respectively.

By Jo He-rim (herim@heraldcorp.com) 
Byun Hye-jin (hyejin2@heraldcorp.com)