[Econ & Biz] Can S. Korean chip companies survive Trump's tariffs, China's tech progress?

The Trump administration's tariff plans are now raising concerns for Korea's chip industry at a time when the sector also deals with China's rapid technological advancement.

For more on this, we have our trade correspondent Lee Soo-jin in the studio.

Soo-jin, to start us off can you tell us about the threats that Korea's chip industry is facing?

Right, so little over a week ago Trump imposed tariffs on aluminum and steel.

This marked the first item-specific tariffs of his second term.

And this week he announced plans to impose tariffs of around 25 percent on auto imports, pharmaceuticals, as well as semiconductors.

Here's what he said.

" I've been contacted by some of the biggest companies in the world. And we'll be announcing various very large companies, the biggest, actually, and they'll be coming back, having to do with chips."

Shifting global dynamics are expected to significantly impact the nation's economy, as semiconductors are its top export.

In 2024, chips accounted for 20-point-8 percent of Korea's total exports, the highest share among all sectors.

" In the area of semiconductor market, two to four-percent tariff rate makes a significant impact on the market. But now we're talking about 25 percent on semiconductors which means a lot of impact on semiconductors market generally and on Korean exporters particularly."

The tariff threats come as China's CXMT challenges Korea's dominance in memory chips, with its successful production of high-performance DRAMs like DDR5 and HBM, both key components for AI and server applications.

How is South Korea's chip industry planning to navigate these challenges?

Well,.. Korea's chip industry is globally recognized for its innovation efforts.

And it's these efforts that have led to it playing a key role in the semiconductor supply chain.

So let's take a look at what these efforts look like, starting with none other than Samsung Electronics.

"Semiconductors are essential to AI development. Important future developments include bonding technology that builds layers through chipsets and reducing resistance in the backend."

Samsung Electronics and SK hynix, in the third quarter last year had a combined market share of a whopping 75-point-5 percent in the memory chip sector.

But it's not just large conglomerates that are rapidly advancing their technologies.

"We have developed a technology that makes materials like Teflon and other special materials bond well with metals, which was difficult before. This breakthrough is important because it helps create a better foundation for circuit boards."

Yet another local company is supplying big-name firms like SK hynix and Samsung Electronics with ultrasonic non-destructive testing equipment that scans chips for defects.

"Our technology inspects semiconductors before mass production. As we locally produce all our technology, this will also help us avoid tariff-related issues."

The company also plans to further incorporate AI technology as it aims to take part in supply chains overseas as well.

What are measures that are being carried out?

So we're seeing efforts across various government sectors.

We saw a report earlier about how the officials from the Trade Ministry are holding talks with representatives from major companies and think tanks to come up with response strategies.

And the National Assembly's Strategy and Finance Committee earlier this week also passed an amendment to the so-called "K-Chips Act," aiming to provide greater tax incentives for the semiconductor industry.

The amendment increases the tax credit rate for facility investments by chip companies by 5 percentage points, from the current 15 percent to 20 percent for large and mid-sized companies and 25 to 30 percent for small businesses.

And according to an expert,. here's what else the government can do.

"So the key is to try to keep exporters alive until the tariffs are removed. Try to engage with third markets, deepen FTA relationships with the European Union and Canada, deepen relationship with Southeast Asia, and as an option perhaps try to deepen relationship with China as well because if the U.S. market isn't available the next largest market is China."

This looks like an issue that we'll have to continue following.

Thank you for coming in today.

Thank you for having me.