U.S. threat of 100% memory chip tariff at odds with reality

[NEWS ANALYSIS]

  U.S. Commerce Secretary Howard Lutnick’s threat to hit foreign memory chipmakers — specifically Korea’s Samsung Electronics and SK hynix — with 100 percent tariffs unless they commit to building related facilities in the United States is widely viewed by industry sources as unrealistic.

  High labor costs, a shortage of skilled workers, and an underdeveloped manufacturing ecosystem make the United States ill-suited for large-scale production of commodity memory chips compared to foundry operations. Foundries manufacture chips only after pricing terms are negotiated with customers, allowing higher production costs to be partially passed on through contract pricing. Memory chips, by contrast, are standardized commodities produced in advance and sold into the open market.

  Memory chips — including high-bandwidth memory (HBM), a segment in which the two Korean chipmakers command over 80 percent of the global market — are semiconductors that store data so processors can access it quickly. In the era of AI, advanced memory has become indispensable, as training and running AI models require vast amounts of data to be moved between processors and memory at extremely high speeds — a process that often becomes the key bottleneck determining overall system performance.

  Because of this structural difference, profitability in memory manufacturing is driven not by performance — which varies little across suppliers — but by price. Cost reduction is therefore the single most important factor for memory makers. This is why the vast majority of memory production remains concentrated in the two Korean chipmakers’ home country, while manufacturing abroad is difficult to justify and largely limited to China, where cost competitiveness and a mature ecosystem already exist.

  Lutnick’s remarks also run counter to the earlier U.S.–Korea trade agreement, under which Washington committed to providing Korea with semiconductor tariff treatment no less favorable than that given to other major partners such as Taiwan.

 

President Lee Jae Myung shrugged off Lutnick's threat, citing the previously reached agreement and the effect such a tariff would have on f U.S. semiconductor prices.

  “Taiwan and Korea together account for roughly 80 to 90 percent of the U.S. market,” he said. “If a 100 percent tariff were imposed, it would likely result in U.S. semiconductor prices doubling.”

  "We have already reached an agreement to ensure that Korea will not be put at a disadvantage compared with Taiwan."

  Samsung Electronics is investing $37 billion to build a foundry cluster of contract chip manufacturing facilities in Taylor, Texas, with its first fab slated to begin production this year. SK hynix, meanwhile, is constructing an advanced semiconductor packaging facility in West Lafayette, Indiana, with an investment of $3.87 billion.

  Concerns have also been raised that substantial large-scale capital investments in Korea by the two firms could suffer with a diversion or reallocation of funds to the United States, posing a risk of weakening domestic employment and eroding the broader industrial ecosystem. Korea is moving ahead with its own massive semiconductor complex in Yongin, Gyeonggi, backed by roughly 1,000 trillion won ($695 billion) in private investment. Both Samsung and SK hynix are expanding memory capacity there to meet surging global demand, including from U.S. Big Tech companies.

 

Expensive, underdeveloped: U.S. production unlikely
Operating semiconductor fabs in the U.S. is estimated to be 20 to 40 percent more expensive than in East Asian countries such as Korea, Taiwan and China due to higher labor and operational costs and regulatory requirements, according to a 2024 report by the Korea International Trade Association. The report warned that government subsidies, including those under the CHIPS Act, may not be sufficient to offset these long-term disadvantages.
 

 

A recent Nomura Securities report estimated that Samsung and SK hynix may need to invest between 100 trillion and 120 trillion won in the United States between 2027 and 2030 to avoid hiked tariffs. Nomura also projected that Washington could offer Korean chipmakers a framework similar to that extended to TSMC, under which imports up to two and a half times the scheduled U.S. production capacity would be granted exemptions during construction, followed by eased regulations on shipments up to one and a half times after operations begin.

  From construction through operation, the United States lacks the labor pool, infrastructure and industrial ecosystem required for memory manufacturing, industry sources say, adding that high exchange rates and operating costs further undermine competitiveness.

  Micron, the sole major memory maker in the United States, recently committed $100 billion to a mega fab in New York, which held a groundbreaking ceremony where Lutnick delivered the ultimatum that put the Korean semiconductor industry at unease.

  “But even with Micron, a U.S. company, its core production bases are located in Japan, Taiwan and Singapore, which just shows how expensive it is to operate a factory in the United States,” said an industry source who wished to remain anonymous. “Even after construction, there are doubts whether it will be easy to secure sufficient talent for semiconductor production and research and development compared to other regions where fabs have long been concentrated.”

  Ultimately, the issue is straightforward: Manufacturing is significantly more expensive in the United States. Forcing memory production into a high-cost environment, experts warn, risks pushing already-rising memory chip prices even higher.

 

“In the foundry and system semiconductor business, production is order-based, with chips manufactured after prices are negotiated with customers,” said Kim Yang-paeng, a senior researcher at the Korea Institute for Industrial Economics & Trade. “Memory semiconductors are different. They are standardized products produced in advance and sold into the market."

  “That means competitiveness hinges on performance and price. But because performance differences are minimal, price becomes the decisive factor. Higher production costs in the United States inevitably translate into higher prices, putting suppliers at a disadvantage.”




Building domestic capacity
Samsung and SK hynix are planning to build six and four fabs, respectively, in Yongin. SK hynix is ahead of schedule, with its first Yongin fab expected to begin operations in February 2027.

  The cluster is envisioned as SK hynix’s primary global hub for AI-focused memory, with each of the four fabs planned to match the production capacity of six M15X plants. Its M15X fab in Cheongju, North Chungcheong — backed by a 20 trillion won investment — is set to begin high HBM production this year. Upon full ramp-up, the fab will be able to produce 50,000 to 60,000 wafers per month.

  The company also plans to invest an additional 19 trillion won in a new packaging facility in Cheongju, scheduled for completion by the end of 2027. Currently, SK hynix operates two major manufacturing campuses in Icheon, Gyeonggi, and Cheongju, focused on dynamic random-access memory, HBM and NAND flash memory.

  Samsung’s HBM production capacity will likely expand by 50 percent in 2026 compared to the year before, according to multiple domestic media reports.

  For Yongin, the company is scheduled to begin construction on its first factory in the latter half of this year, targeting mass production in 2030.

  The company will invest 60 trillion won in its upcoming P5 factory in Pyeongtaek, Gyeonggi, with mass production set for 2028, targeting AI-specific chips and HBM. The company currently operates four fabs — P1 through P4 — in Pyeongtaek, as well as facilities in Hwaseong and Giheung.

BY LEE JAE-LIM [[email protected]]