The White House’s sudden move to weaponize tariffs against imported semiconductors has jolted the industry and sent Seoul into immediate damage‑control mode. A January announcement introduced a 25% ad valorem tariff on a subset of imported chips and manufacturing gear, and a subsequent statement from Commerce Secretary Lutnick warned that foreign memory makers who refuse to expand production in the United States could face duties of up to 100%. The choice presented to manufacturers, as Lutnick put it, is stark: pay punitive tariffs or commit to domestic capacity expansion.
The immediate commercial shock comes amid a wave of private investment aimed at meeting surging demand for high‑bandwidth memory and other components driven by artificial intelligence and data‑heavy workloads. SK Hynix has just unveiled plans to spend 19 trillion won (about RMB 90 billion) on an advanced packaging campus in Cheongju, South Korea, a project slated for completion in 2027 that will improve its ability to stack and integrate memory chips. At the same time, Micron officially broke ground on a mammoth multi‑plant wafer fab in upstate New York — a roughly $100 billion project the company says will be phased into production from 2030 onward to serve AI and high‑performance computing markets.
Washington’s tariff plan is being rolled out in stages. The initial 25% surcharge took effect on January 15 for a limited list of products while the administration signals further escalation if diplomatic negotiations do not secure greater on‑shore investment. The White House has also floated a tariff‑offset scheme intended to give preferential treatment to firms that build capacity in the United States, offering a carrot alongside the punitive stick. The stated objective is to accelerate the reshoring of semiconductor manufacturing as part of a broader industrial strategy to secure supply chains for critical AI infrastructure.
Seoul’s industry ministry responded quickly with meetings involving major chipmakers, reflecting both the importance of semiconductors to Korea’s export profile and the political sensitivity of the U.S. demand. Officials emphasized that the initial tariff list appears not to target products sold into American data centres and start‑ups, but they warned that the White House document also signals the possibility of a broader expansion of scope. That uncertainty has placed Korean firms in a strategic bind: building new U.S. fabs is technically and financially feasible but takes years and dilutes investment in home markets that currently supply global demand.
For multinationals such as SK Hynix and Samsung, the calculus is complex. Advanced packaging and memory stacking are high‑margin, high‑skill activities concentrated in South Korea and Taiwan today; shifting those lines would be costly and slow. Micron’s Syracuse project shows how much the U.S. is willing to spend to bootstrap domestic capacity, yet even with generous subsidies, labor, supply‑chain ecosystems and permitting remain limiting factors that will delay meaningful production. Tariff threats can change incentives, but they cannot conjure factories overnight.
The broader geopolitical context matters. Tariffs targeted at semiconductors are both industrial policy and foreign policy: they are intended to reduce dependence on foreign supplies and to retain critical technology in allied jurisdictions. But they risk accelerating a balkanisation of the global chip ecosystem, fragmenting production into blocs and raising costs for customers worldwide. For allies such as South Korea, the policy poses a dilemma between accommodating U.S. strategic priorities and preserving export‑led growth tied to existing manufacturing hubs.
Companies will likely respond with a mixture of compliance, negotiation and legal challenge. Some firms may accept U.S. factory commitments in return for tariff relief or offset credits, while others will litigate or push for carve‑outs. Governments, for their part, will need to navigate political optics: Seoul must defend its corporate champions and supply‑chain relevance without directly antagonising Washington or appearing to resist security‑driven economic policy. The short‑term consequence will probably be a flurry of talks and revised investment plans; the long‑term outcome will shape where, and at what cost, the chips that power next‑generation AI are made.
For international buyers, research labs and cloud operators, the policy raises the prospect of higher prices and constrained supply during a prolonged reconfiguration of capacity. The administration’s approach may succeed in accelerating some on‑shore investment, but it also introduces policy risk and regulatory uncertainty into an already tight market. Firms and governments alike must now weigh whether the geopolitical benefits of near‑shoring justify the economic trade‑offs and the disruption to a finely tuned global manufacturing system.