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Parts and materials technology development
MOTIE holds Industry Conference in response to CHIPS Act 2022-08-25

Trade, Industry and Energy Minister Lee Chang-yang held the Semiconductors, Cars and Batteries Industry Conference (hereinafter “Conference”) in Seoul on August 25 to seek public-private joint countermeasures in response to the U.S.’ recently passed CHIPS Act (Creating Helpful Incentives to Produce Semiconductors for America Act) and the Inflation Reduction Act.

The CHIPS Act enables maximum 25 percent investment tax credits to companies making new investments in U.S. semiconductor companies, and beneficiary companies are in turn subject to a “guardrails provision” stipulating that the “covered entity” shall not engage in any “significant transaction” involving the “material expansion of semiconductor manufacturing” in China or any other foreign country of concern for a 10-year period beginning on the date of a CHIPS Act award.

Exceptions, however, also exist for expansion of facilities for the production of older generations of semiconductor technology should those facilities chiefly aim at serving the market in that foreign country.

As for the Inflation Reduction Act, it specifies that only electric vehicles with final assembly in North America qualify for USD 7,500 tax credit, laying out restrictions regarding the battery minerals and parts ratio conditions.

In the Conference, the Ministry of Trade, Industry and Energy (MOTIE) and relevant industries' representatives discussed the following four measures:

One, active communication with the U.S.

The South Korean government has already relayed concerns on August 10 over a possible breach of the WTO agreement and Korea-U.S. FTA to the U.S. Trade Representative immediately after the Senate passed the CHIPS Act package.

As subsections of the Act on batteries, minerals and parts are to be finalized by the end of this year, the Ministry will continue to express the stance and requests of domestic companies through dialogue with the U.S. government and Congress.

Two, countermeasures by domestic industries.

The automobile industry is considering a number of options, including an early commencement of manufacturing plant construction to move up production timelines. Battery producers intend to expand mining investments and critical minerals diversification across countries that have FTAs with the U.S., like Australia and Chile.

Three, cooperation with countries in similar position.

As an exporter of EVs to the U.S., Germany is another country in a similar position regarding the Inflation Reduction Act. South Korea will consider negotiating with Germany and the EU for joint efforts, possibly through automobile industry associations.

Four, public-private communication channels.

MOTIE will organize a public-private “one team” headed by the Director General for FTA Policy committed to examining trade laws and monitoring of major countries for constant communication and cooperation.

Moreover, Trade Minister Ahn Duk-geun plans to visit the U.S. in September to discuss the two aforementioned Acts and prior to that, MOTIE's Deputy Minister-level officials will hold high-level talks with U.S. counterparts.

The Ministry of Foreign Affairs (MOFA), the Ministry of Economy and Finance (MOEF) and other relevant ministries will join in these efforts to seek effective countermeasures.