As the United States prepares a second stage of semiconductor tariff measures, pressure is growing for South Korean companies to invest. After Taiwan secured assurances of tariff exemptions with a 660 trillion won investment, Samsung Electronics and SK Hynix could face demands for additional investment worth hundreds of trillions of won. With South Korean companies lacking room for more investment, whether exemption conditions are specified has emerged as a key variable.

The first-stage item tariff on semiconductors took effect on the 15th, U.S. local time. The main targets are limited to advanced computing chips, specifically AI semiconductor chips from Nvidia and AMD. In Washington and major think tanks, the dominant view is that the real battle begins with the second stage, which would include memory semiconductors. The key variable is a "tariff offset programme" stated in a White House fact sheet, described as a structure that demands additional investment from allied companies under the pretext of exempting tariffs when they invest in manufacturing facilities in the United States.

Yeo Han-koo, South Korea's trade minister, said after returning home on the 17th that memory chips, which South Korean companies mainly export, are excluded, limiting the immediate impact. But he added that it was not yet time to feel at ease because it was unclear when and in what form the second-stage measures could be expanded.

The White House, in a fact sheet, flagged the second-stage measures by saying it could impose broader tariffs on imports of semiconductors and derivative products in the near term and introduce a corresponding tariff offset programme.

Earlier, U.S. Commerce Secretary Howard Lutnick said at a groundbreaking ceremony for a new Micron plant on the 16th, "Any company that wants to make memory semiconductors has two choices," and added, "Either you pay 100%, or you produce in the United States." He effectively singled out Samsung Electronics and SK Hynix. After that, a Cheong Wa Dae official said on the 18th that when South Korea and the United States released a joint fact sheet on tariff talks last year, they specified that South Korea would be subject to conditions that were not unfavorable compared with major countries in the semiconductor sector.

South Korea's chip industry is concerned that uncertainty has grown because the tariff scope of the second-stage measures and exemption conditions tied to U.S. investment have not been specified.

The most likely scenario is applying the Taiwan model. Taiwan recently agreed with the U.S. Commerce Department on an investment package worth $500 billion, about 660 trillion won, together with TSMC and others, and secured assurances of tariff exemptions. According to the Associated Press, $250 billion of that is direct investment, while $250 billion is for credit guarantees and supply chain support. In return, the tariff rate on imports from Taiwan was lowered to 15 percent from an existing 20 to 32 percent.

The investments currently pledged by Samsung Electronics and SK Hynix are only about one-tenth of the Taiwan model. Samsung Electronics has decided to invest at least $37 billion, about 54 trillion won, in Taylor, Texas, by 2030. SK Hynix plans to spend $3.87 billion, about 5.6 trillion won, in West Lafayette, Indiana, to build an advanced packaging production base. By the U.S. logic, to avoid a 100 percent tariff and receive exemptions comparable to Taiwan's, they would have to put an additional investment plan worth at least hundreds of trillions of won on the table in second-stage talks.

A second scenario is selective exemptions based on contributions to security. The Center for Strategic and International Studies (CSIS) raised the possibility that the United States could distinguish strategic materials such as high-bandwidth memory (HBM), essential for U.S. defence and data centres, from general-purpose DRAM.

CSIS suggested that while the United States should raise tariff barriers against low-priced offensives by Chinese general-purpose chips, it should prioritise stable supplies from ally South Korea by exempting tariffs on HBM and other items essential to maintaining AI dominance. But even in that case, Samsung Electronics and SK Hynix could sell cutting-edge chips tariff-free, while facing a high risk of losing price competitiveness against Micron in general-purpose chips, which account for a large share of volume.

◆ U.S. Commerce Secretary Lutnick: "Either 100% tariff or a U.S. plant"...Scope of qualifying investment is key

A third scenario is a slower pace because of an inflation backlash in the United States. The Peterson Institute for International Economics (PIIE) said imposing tariffs on semiconductors would slow U.S. GDP growth and push up prices of technology products. Because memory semiconductors are essential for all electronic devices, it said tariffs would sharply increase server build-out costs for big tech companies such as Google, Microsoft and Amazon. It also cannot be ruled out that lobbying by big tech companies could delay tariff imposition on South Korean companies or ease investment conditions.

The key variable is the scope of investment that qualifies. Bloomberg reported that beyond simple plant construction, moving R&D centres, partnerships with U.S. universities and the scale of local hiring could be included in tariff exemptions. In that case, it could lead to pressure to transfer South Korean know-how in semiconductor design and processes to the United States as well.

The problem is that Samsung Electronics and SK Hynix have limited capacity to make additional investments. Samsung Electronics' semiconductor facility investment is estimated at 34 trillion won last year and 35 trillion won this year. SK Hynix is expected to increase its investment to 34 trillion won this year from 27 trillion won last year. SK Hynix also announced facility investment of about 19 trillion won for its Cheongju P&T7 plant to expand production.

In addition, a plan to convert ongoing U.S. facility investment into memory production lines is also unrealistic. Samsung Electronics' Taylor plant is progressing with line construction for foundry operations, and doubts have been raised about the business case for switching the site for a second plant to a memory line, given the skill level of local workers and labour costs.

An industry official said that with the second-stage tariff scope and exemption conditions based on investment size not specified, it was difficult to predict whether the Taiwan model would be applied as is or whether selective exemptions would be made. The official added that it was a priority to determine how far U.S. demands would go.