SK, SAMSUNG CHIEFS VISIT CHINA

[Anchor Lead]

A number of South Korean business leaders, including SK Group Chairman Chey Tae-won, attended the Boao Forum, known as China's Davos Forum. Samsung Electronics Chairman Lee Jae-yong also visited China last weekend, and attention is being drawn to why the top executives of South Korean semiconductor companies are visiting China.

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SK Group Chair Chey Tae-won is attending the Boao Forum, which is being held
fully in person this year. It's the tycoon's first visit to China in four years.

[Soundbite] Chey Tae-won(SK Group Chair) : "I'll take a look at the recent changes in China and let you know later."

Chey declined to answer questions about semiconductors.

[Soundbite] Chey Tae-won(SK Group Chair) : "(Have you discussed the chips issue with the Chinese?) We're still in the first session."

The SK chief is trying to keep his trip incognito, just like Samsung Electronics Chair Lee Jae-yong did when he visited Beijing last weekend. Sources say SK Hynix executives also joined Chey on this trip. Ostensibly, their goal is to attend the forum, but in actuality they want to meet with Chinese government officials to find out more about the situation in the chip market and the associated risks. They will likely meet with the newly appointed Chinese Premier Li Qiang, who is scheduled to attend the opening meeting of the Boao Forum. Businesspeople from the Korean chip sector are visiting China one by one because of the recently announced guardrails for the U.S. CHIPS Act. Samsung Electronics and SK Hynix, which operate chip factories in China, can only receive U.S. government incentives if they keep their advanced chip facility expansion below 5 percent for ten years. Both chipmakers will inevitably suffer a blow, as the U.S. guardrails virtually prevent them from making new investments. China has already expressed strong protest against the U.S. measures.

[Soundbite] Wang Wenbin(Chinese Foreign Ministry spokesperson (March 22)) : "The U.S. guardrails are meant to lock down scientific technology and strengthen protectionism."

Korean chipmakers are faced with a complex task of persuading China while also weighing their options with regard to the U.S. CHIPS Act and the incentives it offers.