The US is reportedly considering holding back subsidies promised under the CHIPS Act unless companies increase their investment in the country, creating fresh uncertainty for South Korean chipmakers Samsung Electronics and SK hynix.

Bloomberg, citing eight people familiar with the matter, reported Tuesday that Commerce Secretary Howard Lutnick has signaled a possible pause in previously approved grants under the 2022 Chips and Science Act -- Biden’s signature initiative that made $52.7 billion in funding available to global semiconductor firms that invest in the US.

The report added that Lutnick wants companies to invest more without additional government spending, just like Taiwan Semiconductor Manufacturing Company, which recently pledged a $100 billion US investment without a promise of more subsidies -- on top of its initial $65 billion commitment to construct three factories in the US.

The report also revealed that the Commerce Department is exploring the possibility of scrapping the disbursement of awards that have already been agreed upon. At the same time, it is considering expanding the 25 percent tax credit stipulated in the CHIPS Act.

Since US President Donald Trump took office, there has been a flurry of speculation on the future of the CHIPS Act, putting global chipmakers on edge. Trump has repeatedly called for the repeal of the subsidies, arguing that imposing tariffs would be more effective to lure chipmakers to set up manufacturing facilities in the US.

Any delays or pressure for more investment could deal a blow to Samsung and SK hynix, who had already pledged to invest tens of billions of dollars to build new advanced chip facilities.

Samsung, the world’s largest memory chipmaker, is investing over $37 billion to build two new advanced fabrication plants and an R&D facility in Taylor, Texas. In return, the company has been awarded $4.74 billion in direct funding.

SK hynix, the second-largest memory chipmaker, has secured $450 million in direct funding for a $3.87 million investment in building an advanced chip packaging plant and an R&D center in West Lafayette, Indiana.

Companies will not receive the subsidies until they meet negotiated milestones, and the Trump administration is likely to renegotiate these terms.

On Monday, Trump signed an executive order to establish a new entity to take over the CHIPS Act program. The US Investment Accelerator within the Commerce Department will be in charge of implementing the CHIPS Act and will be responsible for “negotiating much better deals than those of the previous administration,” according to the White House.

Amid Trump’s hardline stance, experts say it will not be easy for the Trump administration to scrap the act entirely, as it continues to enjoy bipartisan support in Congress and many Republican-led states are major beneficiaries of chip investments.

“Trump’s stance appears to be a key tool, a 'carrot’ to get more chipmakers to invest in the US,” said Lee Jong-hwan, a system semiconductor engineering professor at Sangmyung University.

Lee added that while the potential for reducing the amount of grants could concern Samsung and SK hynix, it would not be a decisive factor in their investment decisions in the all-important US market.

“Chipmakers don’t decide their investment strategies solely based on subsidies. For contract chipmaking, securing major big tech clients is even more critical, and that is why they are investing in the US. So Samsung and SK's additional investment decision will be based on whether it can secure stable, long-term clients.”

Amid rising uncertainties over subsidies and reciprocal tariffs, which are set to be announced Wednesday in the US, Acting President and Prime Minister Han Duck-soo met with leaders of Korea’s four largest chaebols, vowing to provide support in response to the US trade policies.

At the first Economic Security Strategy Task Force meeting on Tuesday, Samsung Group’s Lee Jae-yong, Hyundai Motor Group’s Chung Euisun, SK Group’s Chey Tae-won and LG Group’s Koo Kwang-mo reportedly requested the government to put utmost efforts into negotiating with the US on tariffs and subsidies.

By Ahn Sung-mi (sahn@heraldcorp.com)