The US government is forced to demand "trade secrets", and the chip giants are very entangled

On the 27th, the US Department of Commerce announced the latest application details of the "Chip and Science Act" for semiconductor companies to set up factories in the United States, which contains a number of content requiring enterprises to disclose key business information, causing concerns among enterprises. "The United States requires the disclosure of many trade secrets", South Korea's "Seoul Economy" reported on the 28th that investing in semiconductor factories in the United States to obtain government subsidies must provide core financial information such as cash flow and core business secrets such as production and sales, and South Korea's major semiconductor companies are in a dilemma. Taiwan's "Economic Daily" reported on the 28th that the restrictive measures of the United States are making Taiwan's semiconductor industry become a "pawn" or "chip" of the United States.

Businesses are required to submit details

According to the US "Wall Street Journal" reported on the 28th, the US Department of Commerce said on the 27th that semiconductor companies seeking US funding under the Chip and Science Act will be required to submit chip factory details and detailed forecasts of revenue and profits in order to evaluate the application. The Chips and Science Act will provide $53 billion in funding to help the United States restore its manufacturing strength in semiconductors. Companies planning to set up cutting-edge chip factories in the U.S. could begin applying for those funds on March 31. "These financial statements will be used to assess the feasibility, financial structure, economic returns and risks of the project applied for in order to determine the amount, type, and terms of the grant," the Commerce Department said in a document outlining financial statement guidelines. ”

The Wall Street Journal said that the latest document requirements of the US Department of Commerce are very detailed. For example, the enterprise should indicate the production capacity, operating rate, sales price of each type of wafer in the factory, sales price in the first year of production, increase or decrease in output and sales price in future years, etc., and inform the ratio of defect-free qualified products. Some analysts said that the above data is the main indicator of the competitiveness of semiconductor manufacturing, and the data of some facilities are corporate trade secrets.

The U.S. Department of Commerce also requires companies to inform the materials used to produce chips and the labor costs required for factory operations, utilities, research and development expenses, and the size of subsidies and loans being received. It is worth noting that if the revenue and profits of the new plant are "much higher than forecast", the guidance document also requires manufacturers to return a portion of the profits.

In addition, companies applying for subsidies are required not to use federal funds for dividends or share buybacks, and must submit plans to buy back shares within the next 5 years. More notably, subsidized companies will be restricted from expanding semiconductor manufacturing capacity in so-called "countries of concern" over the next 10 years, and the list of "countries of concern" includes China.

Xiang Ligang, chairman of the Information Consumption Alliance, told the Global Times reporter that the US approach this time is very delicate, business operations are affected by many parties, and whether the forecast revenue and profit can be realized in the end depends on the actual situation. "For the government, if it is willing to support, it will be supported by money, and sharing profits with enterprises is more like an investor than a supporter." Xiang Ligang believes that in the future, there may be a situation in which only enterprises with high forecasting revenues and profits will receive subsidies. As for whether the US government will implement corresponding measures against companies that do not meet the forecast revenue and profits, it is unknown.

Investment may become "empty"

"Even the selling price of semiconductors must be disclosed? The US government's approach is too much, South Korean companies are overwhelmed", South Korea's "Financial News" reported on the 28th, because the US government requires that subsidized semiconductor companies must provide cash flow and other corporate data, South Korean semiconductor companies are in panic. Faced with the company's core financial information and production and sales status or forced to provide to the US government, Samsung Electronics, SK Hynix and other Korean companies are in a dilemma. Many experts believe that in the future, multinational investment enterprises will carry out fierce follow-up consultations with the US government, and are likely to face pain. According to reports, Samsung Electronics is investing $17 billion to build a semiconductor foundry in Texas, USA, and plans to officially put into production in 2024. SK Hynix is also considering building a state-of-the-art semiconductor packaging plant in the U.S.

Some South Korean semiconductor industry insiders said that the US government is trying to reorganize the global semiconductor supply chain. It is not uncommon for the United States to ask companies in other countries to provide information about their companies in order to develop their own industries and create more jobs. Some experts believe that because it is impossible to predict how much subsidies the US government will give to enterprises, considering the need to share excess profits, union burdens, and US investment restrictions in Chinese semiconductors, it is still unknown whether South Korean semiconductor companies can benefit from US financial subsidies.

Taiwan's "Economic Daily" published an editorial on the 28th, saying that the United States suppresses the development of the Chinese mainland semiconductor industry in various ways, and the choice of Taiwan enterprises and customers is limited, the production location is limited, and even components, raw material sources, and cooperation objects will also be affected. Taiwan's semiconductor industry has become a "pawn" or "chip" of the United States, as a weapon to contain opponents, and may also become an outcast at a specific moment.

The article also said that when the United States asked semiconductor and even other high-tech supply chains to move to the United States to set up factories, some supply chain operators "voluntarily" cooperated to set up factories and accept costly production conditions. However, when Taiwanese enterprises set up factories in the United States, the local government may impose more supporting requirements, which will further affect the operational efficiency of the industry's production there.

"Chip subsidies in the United States are selective, which puts forward higher requirements for applicant companies. It is possible that some chip companies that invest in the United States will eventually be empty. Pan Helin, co-director and researcher of the Digital Economy and Financial Innovation Research Center of Zhejiang University International Business School, told the Global Times reporter on the 28th that the key problem of the US "Chip and Science Law" is that the current high inflation in the United States, the price of labor is very expensive, and there is a shortage of labor prices, and the cost will rise sharply for chip companies, and if chip companies do not get subsidies, it will discourage enthusiasm.

South Korean chip manufacturers are looking for a compromise

Taiwan's "Economic Daily" said on the 28th that the so-called "upper limit profit" clause proposed by the United States is the part that the industry is most concerned about, and they are worried that the profit distribution ratio is too high. At the same time, the island is very worried about TSMC's "de-Taiwanization" under the lure of the United States, and on December 6 last year, TSMC held a relocation ceremony at its new factory in Arizona, USA, to install the first batch of equipment. The first phase of the project plans to mass-produce 5nm process chips, and the second phase plans to mass produce the most advanced 3nm process chips.

Pan and Lin told reporters that both China and the United States are striving for overseas semiconductor companies to set up investment, but because the interests of each manufacturer are different, the first thing to see is whether they are willing to keep chip factories in China or the United States. Pan and Lin said: "China's tax incentives, engineer dividends, and industrial chain integrity are what these manufacturers need, but they also need US funds, and most of these manufacturers cannot technically avoid the 'long-arm jurisdiction' of the United States, so I think they will invest in the United States in the form of branches and subsidiaries, and make decisions depending on the fulfillment of US chip subsidies." ”

Despite the continuous pressure of the US government, South Korean semiconductor companies are still unwilling to give up the Chinese market. "Samsung executives have visited China one after another to find solutions to semiconductor problems", South Korea's "Electronic News" reported on the 28th, Samsung Electronics Chairman Lee Jae-yong and SK Group Chairman Choi Tae-won went to China to participate in important Chinese activities, trying to find a solution to the future development of South Korea's semiconductor industry sandwiched between the United States and China. South Korean companies are facing being forced away from China, their largest sales market, and are struggling to build a compromise on how to expand investment in China and maintain friendly relations with China under pressure from the United States.

Xiang Ligang believes that when applying for subsidies, local companies in the United States will have various ways to bypass restrictions or find lawmakers to speak for them. However, the situation of Taiwan and Korean companies is different, and the United States will not let them go, and at the same time sanction or curb their development in Chinese mainland. The future result may be that the United States develops its own chip research and development capabilities, production capacity, and allies will be damaged.