The US government requires South Korean semiconductor companies to hand over confidential data before the 8th

Latest update time：2021-11-04

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In four days, South Korea's semiconductor giants will have to "hand over" a lot of their own confidential information that has never been published to the US government. On the one hand, the US government says it cannot refuse, and on the other hand, there is the business red line of not leaking customer information. In order to balance the two sides, Samsung Electronics and SK Hynix, which are caught in the middle, are making their last efforts.

The troubles of Korean companies originated on September 24 this year. According to a report by Yonhap News Agency on November 3, the US government held a video conference with leading companies in the semiconductor industry at that time, stating that in order to restore the semiconductor supply chain, semiconductor companies must fill out a questionnaire containing 26 questions. These questions range from the daily life of the company to the intervention rights of the president, including sensitive business information such as sales, orders from major customers, inventory, and production increase plans.

Currently, neither American companies such as Intel and GM nor foreign companies such as TSMC, Samsung, and SK Hynix have submitted questionnaires. Samsung Electronics Vice Chairman Kim Ki-nam said in an interview last month: "We are considering various factors and responding calmly." On October 28, SK Hynix CEO Lee Seok-hee said: "We are discussing it internally and are actively communicating with the government."

According to an analysis by the Asia Economy, Korean companies are currently very cautious and have expressed principled positions, with no one having figured out how to "handle the matter". Under such circumstances, if any company plans to submit information first, it is likely to be pressured by other companies in the same industry.

The Korea Daily also stated that the US government's request was "unprecedented", so companies have not yet been able to finalize the scope of disclosure of this core information.

Korean companies are caught in a dilemma

However, as the deadline draws closer, the pressure from the United States is gradually increasing, which is causing great distress to Korean companies.

On the one hand, the information requested by the United States is too confidential. According to the Korea Daily, information such as the sales share of the top three customers of each product, supply countermeasures when there is excessive demand for a specific product, and whether new investments will be made to solve the shortage of semiconductors are all top-level confidential information of the company and have not yet been disclosed to investors. Moreover, if customer information is leaked, it will not only damage their relationship with customers, but also incur huge compensation.

But on the other hand, Korean companies dare not refuse the United States. The Korea Daily pointed out that the US government ostensibly allows companies to "autonomously" choose whether to submit information, but in the eyes of the industry, considering the United States' position as the world's largest semiconductor market, this is actually almost mandatory. Last month, the US government also stated: "Companies including Intel and SK Hynix plan to disclose information soon. Whether these companies will provide and the quality of the information provided will determine whether the government will take compulsory measures."

Some analysts said that depending on the situation, the US government may use the Defense Production Act to determine the inventory of specific items. Since the US has placed the semiconductor industry at the height of "security" and is trying to contain China and restructure the global supply chain, it is almost impossible for individual companies to violate the US government's requirements. An industry insider also said: "We accept the US government's request, but the details of the disclosure are still under internal discussion."

Not only Korean companies, but also TSMC, another semiconductor giant, is anxious about this and even "jumping back and forth". They first emphasized twice on September 30 and October 6 that "TSMC will not leak sensitive information", but on October 22, TSMC said: "It will submit the information before November 8."

Three days later, TSMC changed its tune again, saying: "We have not and will not provide confidential data."

South Korean companies seek help from government

On one side is the U.S. government that cannot be provoked, and on the other side are the business red lines that cannot be touched. South Korean companies are really uncomfortable being caught in the middle, and there are growing calls for the South Korean government to exercise its diplomatic capabilities toward the United States.

According to a report by Yonhap News Agency on November 3, the South Korean government had previously frequently communicated with domestic companies and the US government to reduce the burden on companies to submit information. The South Korean government plans to formally discuss bilateral cooperation related to the semiconductor supply chain with the US Department of Commerce after companies submit information.

This month, South Korean Minister of Trade, Industry and Energy Moon Seung-wook will visit the United States and plan to hold talks with U.S. Commerce Secretary Gina Raimondo.

The report said that the two countries have close cooperation in the field of semiconductor supply chain. In May this year, the United States and South Korea held a summit meeting and decided to cooperate to build a stable supply chain for semiconductors, electric vehicle batteries, etc. As one of the steps to build, the two sides recently decided to establish a new director-level semiconductor dialogue channel to regularly discuss cooperation issues in the semiconductor field, and also decided to upgrade the existing director-level "U.S.-South Korea Industrial Cooperation Dialogue" level.

A relevant official of the South Korean government said: "We will cooperate with the United States in the entire semiconductor field and plan to switch to a US-South Korea cooperation model to restore the health of the supply chain."

Source: Observer.com Li Huanyu

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