South Korea confirms discussions regarding chip investments with the US as the threat of tariffs intensifies.

      South Korea secured tariff protections for its semiconductor manufacturers, while the U.S. is advocating for American factories. Investment in semiconductors is now intertwined with broader discussions between the two nations, as confirmed by a presidential official in Seoul. This confirmation was reported by Reuters, following signals from Washington regarding plans for targeted tariffs on semiconductor imports.

      Howard Lutnick succinctly articulated the U.S. stance: “If you don’t build here, expect to pay to enter the greatest market in the world,” stated the commerce secretary.

      Seoul believed this issue had already been addressed. Under the agreement made between the two presidents, South Korea agreed to invest $350bn into U.S. manufacturing in exchange for tariff terms that would be "no less favorable" than those offered to competitors with similar chip trading volumes.

      This clause is the essence of the disagreement. It guarantees equal treatment rather than exemption, meaning that while Korean chipmakers are shielded from being isolated, they are not protected from tariffs that apply to everyone.

      The firms involved are the largest memory manufacturers globally. Samsung Electronics and SK Hynix have experienced rising demand as American tech companies expand their AI infrastructure, providing Washington with leverage and Seoul with a need for protection.

      The reference point against them is TSMC. An analysis released in Seoul this week estimated that the two Korean manufacturers would need approximately six and a half times more U.S. investment to match the American presence of the Taiwanese firm.

      This disparity is attributed to the type of manufacturing rather than a lack of willingness. Memory fabs require substantial capital, and their profitability relies on concentration at a single site, which initially led to the industry's development in Korea.

      Domestic expansion has continued unabated. SK Hynix is investing $720bn in memory fabs in Yongin, and discussions are ongoing with both companies regarding a second chip cluster in the country.

      Capital is also flowing in the opposite direction. SK Hynix has announced a $29bn listing in the U.S., allowing it to raise funds from American investors without relocating any fabs.

      There is a circular aspect to the tariff strategy. Both Samsung and SK Hynix provide the memory used in American AI data centers, so imposing a levy on their chips would increase the costs of the expansions that Washington aims to accelerate.

      The forces working in tandem involve both push and pull dynamics. Nvidia has invested $1bn in Naver and reached a $500bn deal with SK Group, which shows how the American industry is strengthening its connections to Korean resources even as the U.S. government pushes for relocation of that capacity.

      Negotiations are not limited to semiconductors. The same official noted that discussions on South Korea’s planned nuclear submarine program have stalled, acknowledging that various issues between the two nations are “sometimes affecting each other.”

      This candid acknowledgment of linkage suggests that concessions on semiconductors can be exchanged for defense matters, indicating that neither issue can be resolved based solely on its own merits.

      Nevertheless, no agreements have been finalized. There have been no announced figures for additional U.S. chip investments, no tariff rates established, and neither Samsung nor SK Hynix has commented on the discussions impacting them.

      Changes are unlikely to happen quickly. Constructing and certifying a memory fab takes years, so even an agreement acceptable to Washington today wouldn’t shift production for the remainder of the decade.

      The immediate concern is the value of the parity clause. If a tariff is applied equally to all foreign chipmakers, South Korea will have ensured fair treatment while also facing a financial burden.