Chips for vaccines? South Korean companies plan to invest $40 billion in the United States

After the US-ROK summit, US President Biden received a gift package from the other side of the ocean - an investment worth US$39.4 billion, including chips, new energy batteries and other industries, which are the key areas Biden has emphasized many times recently. Of course, South Korea's gift is not free. Tax breaks and infrastructure support are standard. South Korea also has a more urgent request - the new crown vaccine.

"South Korea and the United States will set up an expert group on a comprehensive vaccine partnership as soon as possible to follow up on the South Korea-U.S. vaccine cooperation agreement." At a press conference on the 23rd, South Korea's Vice Minister of Health and Welfare Kang Do-tae said.

This is a re-emphasis on the results of the US-ROK summit two days ago. Biden met with South Korean President Moon Jae-in at the White House on the 21st, and the two sides focused on the supply of new crown vaccines and the Korean Peninsula issue.

Regarding the vaccine issue, Biden said that given the "close contact" between South Korean soldiers and US troops stationed in South Korea, the US will "provide full vaccination" to 550,000 South Korean troops, "for their own good and for the good of the US military." The United States has 28,000 troops stationed in South Korea. The Associated Press pointed out in its report that this is the first time the Biden administration has made a commitment on how to specifically use the 80 million doses of vaccines it plans to provide overseas.

Moon Jae-in said that he and Biden agreed to establish a partnership on the supply of COVID-19 vaccines, utilizing American technology and South Korea's manufacturing capabilities to enable South Korea to obtain a stable supply of COVID-19 vaccines.

The latest press conference revealed some details of the two sides' vaccine cooperation. According to the South Korean government, the expert group on comprehensive vaccine partnership will be composed of scientists, experts and civil servants from both countries, and will mainly discuss production, research and development, and cooperation on raw and auxiliary materials in the vaccine partnership.

The generosity of the United States is not without reward. After the summit, South Korea and the United States also held a business roundtable meeting, at which four South Korean groups, Samsung, SK, LG, and Hyundai, announced their investment plans in the United States, with a total scale of US$39.4 billion. The South Korean presidential office said that the US Department of Commerce and the South Korean Ministry of Industry have reached a consensus that in order to continue chip industry cooperation, the two countries need to adopt policy measures such as incentive support, joint research and development, standard setting cooperation, and human resources training and exchanges.

Specifically, in the chip industry, Samsung Electronics has decided to invest $17 billion in a new foundry project. In the battery industry, LG Energy Solutions and SK Innovation will invest about $14 billion to establish a joint venture or invest separately. Hyundai Motor plans to invest $7.4 billion in new energy vehicle production and charging infrastructure. In addition, SK Hynix also plans to invest $1 billion to establish an emerging industry R&D center in Silicon Valley, covering artificial intelligence and NAND Flash solutions.

It is worth mentioning that both chips and new energy are key industries that the Biden administration is concerned about. A few days ago, Biden delivered a speech in Detroit, the "Auto City", emphasizing that "the United States is far behind in the scale of the electric vehicle market, infrastructure construction, and battery production", and said that with the $174 billion electric vehicle investment in the $2 trillion "massive" infrastructure plan (also known as the American Jobs Plan), the United States is expected to lead the global electric vehicle market.

Obviously, the investment plans of LG, SK, Hyundai and other companies are exactly what Biden wants. The day before, Ford Motor Company of the United States had reached a cooperation agreement with SK Innovation of South Korea. The two parties will establish a joint venture company called BlueOvalSK and build a battery factory to jointly produce electric vehicle batteries in the United States. The factory has an annual production capacity of about 60 GWh of power batteries and array modules, and there is room for expansion. However, the specific investment amount of this company and the details of the equity distribution of both parties have not yet been announced.

In addition to Biden's new energy vehicles, chips are also a current pain point for the United States. As the global chip shortage hits the automotive, electronics and other industries, the Biden administration has repeatedly emphasized support for the U.S. chip industry. In April this year, Biden met with executives of major chip companies such as Samsung, after announcing plans to invest $50 billion in semiconductor manufacturing and research.

It is worth mentioning that Samsung originally had a wafer fab in Austin, Texas that mainly uses mature processes such as 14nm/28nm and above. However, in February this year, the fab was shut down due to power outages and water shortages caused by a snowstorm in the United States, resulting in losses of approximately US$266 million to US$355 million.

At the same time, South Korea also made corresponding "requests". The South Korean presidential office said on the 21st that South Korea has asked the United States to provide tax breaks and supporting measures for power and water supply infrastructure for South Korean companies such as Samsung Electronics to help these companies invest better (in the United States). On the 21st, the US Department of Commerce and the South Korean Ministry of Industry agreed that in order to continue chip industry cooperation, policy measures such as tax cuts, subsidy support, joint research and development and cooperation in the formulation of standards, and human resources training and exchanges are needed.

"This time, Moon Jae-in led four major corporate conglomerates to visit the United States. The U.S.-South Korea alliance has become more comprehensive and has greater economic significance. They want to build a semiconductor alliance and a vaccine production alliance." Li Jiacheng, associate professor at the School of International Relations of Liaoning University, said frankly.

Li Jiacheng pointed out that on the one hand, the two sides want to achieve US-South Korea integration in the semiconductor supply chain; on the other hand, although South Korea has strong vaccine production capabilities, it lacks technology and raw materials. The two sides have also reached a cooperation on this. In the future, this production alliance will be beneficial to the United States, South Korea, as well as the world. In the future, as vaccine production capacity expands, it will be impossible to store the vaccine for a long time after production, and it may be exported to other countries through donations or sales.

In addition, Li Jiacheng also analyzed that South Korea has achieved the goal of Moon Jae-in's visit to the United States. Before Moon Jae-in's visit to the United States, the biggest demand in South Korea was to obtain vaccines from the United States. This time the United States agreed to provide vaccines to South Korea, which solved the urgent problem. In addition, after reaching a production cooperation, it is also beneficial to the easing of the domestic epidemic in South Korea. In fact, due to the epidemic, Moon Jae-in's approval rating is also declining, and he also hopes to reverse his approval rating through this cooperation. "The United States has also achieved its own demands, and the two sides have achieved an exchange of interests."