Washington Tells Samsung and SK Hynix to Build: No Rule Exists Yet

The G20 Innovation Ministerial met at the Carolina Inn in Chapel Hill, North Carolina, on Wednesday, September 2. U.S. Commerce Secretary Howard Lutnick spoke to CNBC there and summed up the next shape of the chip tariff in two clauses:

"If you build here, you don't pay, but if you don't build here, expect to pay to enter the greatest market in the world."

Lutnick named no company. The next morning the Seoul papers supplied the names themselves: Samsung Electronics and SK hynix. Between them the two hold 63% of the global DRAM market, and neither makes a meaningful quantity of memory inside the United States.

This piece takes three questions separately: what exactly was said, whether any instrument makes it binding, and whether the instrument that does exist actually reaches Korean memory. The three answers are not the same.

The first two figures belong to companies that manufacture in America; the last two to companies that manufacture in Korea. Which side a new rule would reward sits inside those four numbers. But the place to start is what is actually in force today.

What the January Rule Actually Covers

Proclamation 11002, signed on January 14, 2026, placed a 25% duty on certain advanced compute chips and explicitly called the step "Phase 1." The notice was published in the Federal Register on January 20 and opened lines 9903.79.01 and 9903.79.02 in the tariff schedule.

The scope is narrow. The duty applies only to logic chips that clear specific compute-performance and memory-bandwidth thresholds; the examples customs advisories give are Nvidia's H200 and AMD's MI325X. The proclamation also carved out six separate exemption categories covering data centers, research and development, repairs and public-sector use.

The conclusion that follows is easy to skip past: the DRAM and NAND that Samsung and SK hynix sell into the United States are not within the scope of this duty today. A memory die is not a logic die, and the thresholds in the proclamation do not describe memory. When the headlines say Washington has targeted Samsung and SK hynix, there is at present no instrument that actually lands on that target.

For the second phase, the market report the Commerce Department was required to complete by July 1 was completed. Its contents were still unpublished as of August 30. There is no Federal Register notice for a second phase, no rate, no exemption structure and no timetable. What Lutnick voiced is a preference; the text that would turn it into an action has not been written.

Why the Exemption Is Not an On-Off Switch

Lutnick also said where the design would be copied from:

"We gave tariff relief to companies who built their innovative pharmaceuticals in America and did MFN. So that's what you should look for in semiconductors."

The structure built for pharmaceuticals has three tiers. A company with no agreement pays 100% on patented drug imports; a company that signs only an onshoring agreement with Commerce pays 20% through April 2, 2030; a company that adds a most-favored-nation pricing agreement with the health agency pays 0% through January 20, 2029. Getting to zero takes more than a promise to build a factory — it takes two separate signatures with two separate agencies.

What the chip equivalent of that second signature would be is undefined. Memory is not priced the way drugs are: contracts are negotiated quarter by quarter and there is no government buyer. Commerce has not said publicly what would stand in for the MFN condition in semiconductors.

The mechanism that matters shows up in the Taiwan agreement signed in January. There the exemption is not a yes or no but a quota: duty-free imports up to a set multiple of the company's existing U.S. manufacturing capacity. While a plant is under construction that multiple is 2.5; once the plant is finished it drops to 1.5. Taiwan's Vice Premier Cheng Li-chiun described the arrangement this way:

"the U.S. will grant Taiwan the most favorable treatment: zero tariffs within the quota."

That definition turns the tariff from a penalty into a rate. What you pay depends on how much you can make in America.

The Arithmetic: One Duty, Three Different Bills

What the arithmetic produces is this: the announced rate is identical for everyone while the effective rate varies company by company. The formula is short — effective rate equals 25% times (1 minus 1.5 times U.S. capacity divided by U.S. shipments). As the capacity share rises the effective rate falls, and at a certain point it reaches zero: a company that can make two-thirds of its shipments inside the United States brings all of its imports in duty-free under a 1.5x quota.

Building a tariff this way converts it from a tax into an investment threshold. A company that does not want to pay has two routes: ship less, or build in America. The effective rate lands in cost of goods sold and pulls the gross margin down directly (How to Read a Balance Sheet).

Where Korea Stands

Samsung's total U.S. investment, including the Taylor, Texas foundry, is $37B. SK hynix's HBM packaging and research site in Indiana is $3.9B. Together, $41B. TSMC's Arizona commitment alone is $265B and Micron's runs to $250B through 2035.

HBM stands for high-bandwidth memory, the stacked memory arrays that sit beside AI accelerators. SK hynix's Indiana site packages those stacks rather than fabricating them, which means what is installed in America is the back end of the chain, not the die itself. Samsung's Texas plant does foundry work, not memory.

The gap is 6.5 times. To reach the investment level Taiwan has committed to, the two Korean companies would have to put in six and a half times what they have spent to date. The administration puts total construction commitments announced since it took office at $1.2 trillion; there is no new Samsung or SK hynix line inside that figure.

On market share the picture inverts. In the second quarter Samsung held 38% of the DRAM market and SK hynix 25%, with SK hynix's share down four points from a year earlier. The two companies selling the most memory into the American market are the two making the least memory inside it.

What the Market Did

Thursday, September 3 brought a sharp afternoon sell-off in Seoul. South Korea's presidential office responded immediately, saying it was in active contact with the U.S. side, and an official noted that specific details had not been finalized as far as it knew. The index recovered its loss.

The Kospi closed the day up 0.26% at 6,579.48. Samsung Electronics fell 0.2% and SK hynix 1.05%. The two companies named in the headlines answered the news said to be aimed at them with moves of about one percent.

That non-movement is itself a finding. It does not mean the market missed the news; it means the market saw that the news does not yet rest on a binding text. An unpublished report and a sentence from a cabinet secretary in an interview do not produce an obligation to price.

The share price on the side that manufactures in America sits at the other end of this argument. Micron rose 4.2% on Friday, September 4; Western Digital rose 4.2% the same day. The real catalyst that day was employment rather than tariffs: August nonfarm payrolls came in at 162,000 against expectations near 55,000. Odds of a rate increase at the September meeting moved to 58% and the indexes closed lower. The Dow fell 0.5%, the S&P 500 0.4% and the Nasdaq Composite 0.3%.

What Is Left

Three things exist today: a narrow Phase 1 rule in force that does not cover Korean memory, an unpublished Commerce Department report, and a logic a cabinet secretary described on camera. The fourth thing — a text that writes the quota and the rate — does not exist yet.

There are three dates to watch. Whether a second-phase notice appears in the Federal Register; whether the report Commerce completed in July is released; and December 31, 2026. That last date is when the 35% manufacturing investment credit for U.S. plant construction expires. If Congress does not extend it, a company that answers the call to build in America will have broken ground without the incentive.

This piece draws on the Korea Herald and Seoul Economic Daily accounts of Lutnick's September 2 CNBC interview, the text of Proclamation 11002 as published in the Federal Register, Tom's Hardware's account of the Taiwan agreement's quota structure, and closing data from the Seoul exchange on September 3. Rates, scope and timing for the second phase rest on no official document as of today, and that distinction is preserved throughout.