A battery cell factory is under construction in Spring Hill, Tennessee, the United States, in this file photo. Ultium Cells -- a joint venture between LG Energy Solution and General Motors -- has set up the plant to supply batteries for electric vehicles. Courtesy of LG Energy Solution

Samsung, LG and SK are concerned about their investments in the United States amid a spike in construction costs and lingering subsidy uncertainties ahead of the upcoming presidential election in the world's largest economy, according to officials and analysts, Tuesday.

Samsung Electronics invested $17 billion (22.3 trillion won) for the construction of a chip factory in Taylor, Texas. The factory will start mass-producing semiconductors used for fifth-generation network systems or artificial intelligence (AI) solutions in the latter half of this year.

But the company is widely expected to shoulder a bigger financial burden — as much as $8 billion for the plant's construction — due to soaring material and labor costs there.

Officials from the Korean chip industry said the financial cost for their overseas construction of new facilities is growing, but there is no clear strategy for them to reduce the burden.

"The U.S. investment plans apparently pose a growing financial burden for global chipmakers and any other manufacturing players making facility investments there," an official from a local chipmaker said. "Few would have predicted that both the labor and construction costs would rise at this alarming pace. Aside from the inflationary aftermath, we are also faced with political risks ahead of the U.S. presidential election."

Battery firms are increasingly concerned about soaring construction costs also. LG Energy Solution dropped an earlier plan to build its fourth battery manufacturing facility in Indiana with General Motors (GM) for a similar reason.

This was triggered by a sharp increase in their construction costs there. According to data from the U.S. Bureau of Labor Statistics, the cost of a new construction project surged by about a third as of the end of 2023, from three years earlier.

This forces Korean chipmakers and battery firms to reassess their investment strategies in the U.S., in a somewhat ironic twist from a few years earlier when they rushed to the nation to gain more tax incentives and subsidies from the incumbent Joe Biden administration.

Construction is underway for a battery plant that has been set up jointly by SK On and Ford Motor in Glendale, Kentucky, the United States, in this file photo on Dec. 5, 2022. AP-Yonhap

Their budget planning could face even more challenges if Trump regains power, as he is widely expected to stick to his ultra-protectionist policies. The former U.S. president has warned that he would scrap or drastically cut subsidies for foreign firms there.

TSMC, the world's largest contract chipmaker, also delayed the operation of its first plant in Arizona by a year to 2025. The company also delayed the operation of its second production facility from 2026 to 2027.

SK On, a secondary battery affiliate of SK Group, is also under mounting financial pressure. The company teamed up with Ford Motor to build battery factories in Kentucky and Tennessee. But both firms ended up delaying the timeline for commencing operations at its second plant in Kentucky, hit by rising construction costs and a slowdown in the electric vehicle (EV) industry.

The once-promising outlook for the battery industry shows signs of rapidly losing steam as the market entered a slowdown for EV adoption. Therefore, the SK affiliate is in dire need of capital to smoothly progress in its investment plans. SK On suffered an operating loss of 581.8 billion won in 2023, and is projected to incur a bigger loss of 700 billion won in the first half of this year amid declining EV sentiment and a rise in facility construction investment costs, according to a report by Yuanta Securities.

Market analysts said that there is no relief as of yet from this difficult period. They urged the government to play a role as a mediator, so companies can map out more specific investment plans by clearing away any lingering uncertainties.

"The government is advised to stand at the forefront in discussing subsidy-related issues with its U.S. counterparts, so local chipmakers and battery firms' uncertainties can be alleviated," Kim Moon-tae, head of an industry policy division at the Korea Chamber of Commerce and Industry, said.

"If Korean authorities issue guidelines on local firms' action plans at the very least, this will be of great help to them," he said. "But the risks stemming from rising construction costs are inevitable, as this is a global phenomenon."