U.S. tariff repercussions push Korean component manufacturers towards potential pricing stress
In a significant development, the US and South Korea have reached an agreement on tariffs for semiconductors and related electronic products, with a rate of 15% set for exports from South Korea to the US. This comes after initial threats of tariffs as high as 100%, which would have had a significant impact on Korean electronics manufacturers.
The 15% tariff rate matches similar agreements the US made with Japan and the EU, indicating South Korea is treated as a favored trade partner. Major South Korean semiconductor manufacturers, such as Samsung Electronics and SK Hynix, are shielded from the more punitive 100% tariffs that were initially threatened.
However, the tariffs have created uncertainty and pressure for Korean exporters, leading to a cautious stance in the industry. Despite this, Korean chip exports still showed resilience in 2025, with year-to-date growth of 7.8% in value and 3.3% in volume in the first half of the year.
The evolving US-China tensions and tariffs are encouraging Korean and other Asian chip manufacturers to shift some production to Southeast Asian countries like Malaysia, Vietnam, and even India to diversify supply chains and mitigate risks.
The US-Korea trade deal also includes commitments from South Korea to invest heavily in the US, aligning with the broader trend of Korean chipmakers establishing or expanding US production facilities to comply with trade rules and reduce tariff exposure.
In the autos and auto parts sector, where tariffs are also significant, Korean exports to the US have declined in value and volume, reflecting the tariff impact on that sector more severely than on semiconductors.
Looking ahead, the scope of exemptions from potential tariffs is a critical issue. Uncertainty remains over whether semiconductors embedded in finished goods would also be exempt from potential tariffs. Suppliers fear inevitable pressure to cut component prices if high tariffs are imposed on end products such as smartphones and PCs.
The US investigation under Section 232 of the Trade Expansion Act is ongoing for semiconductors and related products. The US Department of Commerce is expected to release its list of semiconductor-related derivative products soon. The exemption of tariffs, if granted, is likely to apply only to products exported directly to the US.
Samsung Electro-Mechanics put its Mexican plant construction plans on hold due to the threat of a 30% tariff on Mexican imports. Higher prices for consumer electronics could further dampen consumer sentiment in the US market. If tariffs are imposed on consumer electronics, profitability at electronics makers like Samsung Electronics and LG Electronics may be affected.
If prices inevitably rise due to tariffs, demand in the US market may shrink, triggering a cycle of reduced demand for semiconductors and components overall. In April, US Commerce Secretary Howard Lutnick stated that smartphones, computers, and some other electronics will come under separate tariffs. Washington is expected to announce new item-specific tariff rates, including on semiconductors, as early as this week.
- The US-Korea trade deal, which includes a 15% tariff rate for South Korean exports of semiconductors and related electronic products to the US, emphasizes technology as a key aspect of the two countries' lifestyle-focused trade relations.
- As concerns about tariffs and their impact on the electronics industry grow, technology companies like Samsung Electronics and SK Hynix in South Korea are looking to diversify their lifestyle market presence by expanding production facilities in countries like Malaysia and Vietnam.
