U.S. memory chip demands throw wrench into Korea's investment plans as trade friction spills into security

The government’s plan to unveil its first investment project in the United States by the end of this month has been thrown into uncertainty by an unexpected factor — Washington’s demand for investment in U.S. memory chip production.

The pressure comes shortly after Samsung Electronics and SK hynix announced plans to invest more than 800 trillion won ($565 billion) in Korea’s Honam region, which encompasses the southwestern Jeolla provinces.

The government’s push to foster strategic industries at home has effectively come back as a boomerang in negotiations with Washington, as the United States steps up pressure on the Korean chipmakers to invest in memory production in the States.

Signs that friction over trade is spilling into security negotiations are also emerging, adding further turbulence to the Korea-U.S. alliance.

Samsung, SK hynix singled out

The U.S. demand for memory chip investment was a key issue during a closed-door trade meeting that took place at the Blue House on Thursday, according to multiple sources from the ruling bloc on Monday.

The government had been primarily considering an energy project as the first investment under its U.S. investment initiative. But the negotiating landscape has shifted on strong demands from Washington for investment in memory production facilities in the United States.

“The U.S. side is changing its priorities and making additional demands,” a ruling bloc official said. “It is as if the goalposts for U.S. investment have been moved.”

Attendees at the meeting reportedly leaned toward the view that investment in U.S. memory production would entail practical difficulties. There are concerns that Samsung Electronics and SK hynix, which have already pledged massive investments in the Honam region, could see their resources stretched if they were to make additional investments in the United States.

“Memory chips are one of our strategic industries,” a source said. “This is something that needs to be considered alongside the development of domestic clusters and the broader semiconductor ecosystem.”

The timing of Washington’s demands is also notable. On July 9, about 10 days after the Korean government announced plans in late June for the two chipmakers to invest in the Honam region, U.S. Commerce Secretary Howard Lutnick publicly pressured the two companies by name to build memory chip fabs in the United States.

Kim Yong-beom, chief of staff for policy at the presidential office, responded on Facebook shortly afterward, saying that expanding Korea’s chip fabrication plants is a “national project.”

The memory chip issue appeared to have ended with the public exchange, but in fact, it has since taken on greater importance in behind-the-scenes negotiations.

The intensifying U.S.-China rivalry over AI supremacy is also part of the backdrop. The U.S. State Department is preparing a letter effectively asking partner countries in AI cooperation to choose between a U.S.-led initiative and a competing Chinese framework, Reuters reported Friday.

Tariff pressure resurfaces

While pressure over memory chip investment intensifies, another concern is also re-emerging — the threat of higher tariffs.

Tariff pressure has resurfaced as new demands and reviews of the commercial viability of potential projects delay investment decisions.

In January, U.S. President Donald Trump threatened to restore tariffs on Korean automobiles from 15 percent to 25 percent, citing delays in the passage of a special law on Seoul's investment in the United States. The immediate threat subsided after the legislation passed in March.

But with the selection of the first investment project now delayed, Washington has again raised the possibility of increasing tariffs as it continues to apply pressure, according to sources.

“The pressure did not end after one or two complaints; it's ongoing,” an insider who requested anonymity said. “The best course would be to quickly announce the first investment in the energy sector to show tangible progress while continuing discussions over the additional demands.”

Against this backdrop, Trade and Industry Minister Kim Jung-kwan made an emergency trip to the United States on Sunday, just three weeks after visiting the country from July 22 to 25 for talks on U.S. investment and shipbuilding.

“We said during our previous visit that we were considering announcing a project around the end of August or early September, but as we approach the final stage, various issues are emerging at the working level,” Minister Kim said in the United States.

Trade friction spills into security talks

Trade tensions between Korea and the United States are showing signs of spilling beyond investment and tariffs into security negotiations. Concerns emerge that prolonged economic friction could even strain the broader alliance.

Diplomatic observers say Trump’s unexpected remarks Sunday may also reflect the increasingly strained atmosphere between the two countries.

Trump wrote on Truth Social that he had ordered a significant reduction in joint Korea-U.S. military exercises and claimed that he had asked the Korean president whether Korea would join efforts to denuclearize Iran but received the response, “No thanks.”

The remarks appeared at odds with Seoul's openness to possibly contributing to securing safety in the Strait of Hormuz, which also fueled speculation that frustration over delays in Korea’s U.S. investments may be surfacing in unrelated areas.

The U.S. side has warned that it would kick the matter up directly to Trump if Seoul further delayed announcing its investment plans, sources said.

There are also signs that trade friction is beginning to affect security negotiations, namely follow-up discussions on a joint fact sheet covering security issues, including the acquisition of nuclear-powered submarines and revisions to the Korea-U.S. nuclear cooperation agreement.

The two sides held their first meeting in Seoul in June and had initially planned a second round in Washington in July. Over two weeks into August, the meeting has yet to happen.

“The biggest concern is that trade issues are beginning to consume the security negotiations as well,” a senior ruling bloc official said. “We are trying to contain the fallout as much as possible, but we are now in a situation where it would not be surprising if the United States simply flipped the table and said, ‘We can’t proceed with the security negotiations.’”

Broader strains cloud Korea-U.S. ties

The larger challenge is that tensions between Korea and the United States are becoming too broad to resolve by simply adjusting one or two outstanding issues. 

While the U.S. investment is emerging as the most immediate flashpoint, there are also other fires to put out, from Seoul’s perceived discriminatory measures against Coupang over a massive data leak last year and recent attempts by Pastor Son Hyun-bo, who visited the Oval Office earlier in the month, to get the White House’s attention on various claims of suppression and oppression, including policies concerning religion.

“The waves keep getting higher,” a source familiar with the situation said. “Accelerating U.S. investment is the first thing we need to do to calm the overall situation, but the U.S. side continues to add demands and increase the number of issues that also need to be assessed for commercial viability.”

“The dilemma is that the longer our response takes, the greater the burden on relations with the United States becomes.”

BY YOON JI-WON [kim.jiye@joongang.co.kr]