With the Democratic Party regaining control of Congress following the midterm elections, the tariffs and regulations imposed by the Trump administration on China, as well as policies aimed at attracting investment to the U.S., are now under increased scrutiny. Both parties are united in their stance against China, which is expected to heighten the burden on South Korea's semiconductor industry caught in the middle of U.S.-China tensions. Additionally, regulations concerning Artificial Intelligence Data Centers (AIDC) are anticipated to bring significant changes across the AI sector.
According to U.S. political sources, the Democratic Party plans to initiate efforts to nullify the trade law that served as the basis for Trump’s tariffs following their midterm victory. They are also expected to investigate the allocation of the hundreds of billions of dollars in U.S. investments promised by South Korea and Japan.
The focus of policy is shifting from legislation to oversight. Tariffs and export controls are implemented through the executive powers of the president. To override a veto, a two-thirds majority in both the House and Senate is required. Consequently, the Democratic Party is expected to exert pressure through hearings, investigations, and budgetary scrutiny.
Regulations targeting China are expected to intensify. Both parties view semiconductors and AI as national security issues. Renee Buck, CEO of BCI Global, predicted in an op-ed on October 30 that "if the Democrats control both chambers, U.S.-China relations will worsen, and chip export controls will tighten further."
In the U.S., Congress will scrutinize the implementation of investments while also tightening controls on operations of factories in China. Samsung Electronics and SK Hynix lost their validated end-user (VEU) status at the end of last year. Since then, they have been obtaining annual permits to bring U.S. equipment into their factories in Xi'an, Wuxi, and Dalian. The U.S. Department of Commerce has allowed equipment for maintaining existing lines but has prohibited expansion and process upgrades. As negotiations for next year's permits approach, if Congress leans towards strengthening export controls, the review process will inevitably become more stringent.
Pressure from China is also significant. China had postponed the expansion of its rare earth export controls announced last October for one year following the U.S.-China summit, with that deadline approaching on November 10. Observers suggest that if Congress adopts a hardline stance against China, China may reintroduce its control measures instead of extending the postponement. This situation places domestic industries in a double bind, unable to expand factories in China while worrying about material procurement.
The pressure extends to the AI industry as well. The first area to face challenges is the AI Data Centers (AIDC). The $800 billion AIDC investments from companies like Amazon, Alphabet, Meta, and Microsoft are directly confronted by political issues surrounding electricity costs. The GRID Savings Act proposed by the Democrats mandates that large data centers bear the full cost of expanding the power grid.
Since securing power and obtaining permits are crucial for construction speed, cost regulations could lead to delays in investment timelines. New permits for data centers consuming over 50 megawatts (MW) of electricity were halted for up to a year in New York last July. Twelve states, including Virginia and Georgia, have also been discussing restrictive legislation, and with Democrats showing strength in gubernatorial elections, similar regulations are expected to arise in state legislatures next year.
Control over semiconductor exports will also shift to the Democrats. The Senate has been pushing amendments to the National Defense Authorization Act that would require congressional review of advanced AI chip exports, mandate location tracking devices on exported chips, and prohibit the sale of semiconductor manufacturing equipment to China through the 'MATCH Act.' Unlike previous instances where Nvidia managed to derail the 'GAIN AI Act' through backdoor negotiations, this time the Senate is also controlled by the Democrats. The export permits for Nvidia's H200 to China, which were allowed under the Trump administration, are expected to come under scrutiny during hearings and data requests.
If model development is delayed or data center construction is postponed, orders for AI accelerators will decrease, leading to a drop in demand for high-bandwidth memory (HBM) used in those accelerators. The H200 also incorporates HBM, and if exports to China are blocked, the volume will decrease through the same channels. This directly impacts the shipment volumes of Samsung Electronics and SK Hynix, which account for 80% of the global HBM market.
Kim Yang-pyung, a senior researcher at the Korea Institute for Industrial Economics and Trade, stated, "Even if congressional oversight intensifies, HBM demand will not immediately decline. However, if the issues surrounding data center permits and electricity costs drag on, the timeline for big tech expansions could be pushed back."
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.