The Korea Herald


S. Korea targets W340tr investment for chip supremacy

Industry welcomes regulatory easing but expresses disappointment at lower-than-expected tax benefits

By Lee Ji-yoon

Published : July 21, 2022 - 15:49

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Samsung Electronics' chip-making complex in Pyeongtaek, Gyeonggi Province (Bloomberg) Samsung Electronics' chip-making complex in Pyeongtaek, Gyeonggi Province (Bloomberg)
The South Korean government on Thursday vowed financial and regulatory support to pave the way for the chip industry’s investment of 340 trillion won ($259 billion) over the next five years and nurturing more than 150,000 skilled workers in the field.

As chips are increasingly being perceived as key economic security assets around the world, South Korea -- home to the world’s top two memory chipmakers, Samsung Electronics and SK hynix -- has also come up with a more comprehensive road map to further bolster its chip supremacy.

Over the past decade, chips have been the nation’s top export item, with their trade volume making up the largest share of total exports at 19.9 percent. More recently, the chip industry here is facing challenges as it grapples with supply chain disruptions and heightened global competition.

The new scheme aims to ease regulatory hurdles, among other things, for the chip industry overall.

The government plans to raise the allowable floor area ratio of the nation’s two chipmaking complexes in Pyeongtaek and Yongin, both in Gyeonggi Province, to have more cleanrooms, where silicon wafers are manufactured into chips, to help create more jobs. One cleanroom is known to generate some 1,000 new jobs.

The Pyeongtaek complex will see the number of its cleanrooms to grow from 12 to 18, while the number for the Yongin complex will increase from nine to 12.

The overall approval process for new investments and facility expansion within the complexes will get faster and more flexible for speedier decision-making and business planning.

Attracting and retaining more talent in the chip industry is another key part of the new scheme.

More graduate schools will be designated to share the new mission next year, as they will be subject to financial support, including tax benefits. More chip-related classes will be launched in partnership with businesses, even for students majoring in other fields, creating more job opportunities in the industry.

Through a revision to related laws, student enrollment quotas of related departments at schools will be drastically expanded.

A 350 billion won research and development fund is also under consideration, mimicking the Semiconductor Research Corp. in the US, an industry-led technology research consortium.

More resources are also being poured into fostering the nation’s nonmemory chip sector.

Despite its prowess in memory chips, South Korea’s market share in more advanced logic chips remains at a miniscule 3 percent at present. The government aims to elevate this figure to some 10 percent by 2030.

A related budget scheme was also unveiled: 450 billion won for power semiconductors; 500 billion won for automotive semiconductors; and 1.25 trillion won for artificial intelligence semiconductors.

A 1.5 trillion won budget has also been earmarked to support fabless companies in areas including R&D, production and overseas distribution.

In order to bolster the nation’s chip supply chain, the government also aims to localize 50 percent of key materials, parts and equipment for chips by 2030. Currently, the localization rate remains at 30 percent.

“Competition in the chip industry is getting severe,” Trade Minister Lee Chang-yang told reporters during a memorandum signing event held at the head office of Dongjin Semichem, a local chemicals firm that has recently succeeded developing a photoresist for extreme ultraviolet (EUV) lithography -- an industry first here.

“We will respond flexibly to market conditions in order to maintain our supergap competitiveness.”

Asked about Seoul’s possible joining of the US-led chip alliance, dubbed “Chip 4,” the minister stressed that “national interests” should be the top priority in related discussions.

The US, South Korea’s largest ally, is pushing the initiative, which aims to counter China’s influence in the region as well as boost its technology prowess. Seoul has not yet disclosed its stance on the issue amid heightened pressure from China, its biggest trading partner.

In the meantime, the chip industry welcomed the government’s renewed chip push, including regulatory easing overall, but expressed disappointment at tax benefits that lagged behind their earlier expectations.

Under the new scheme, tax deductions on new facility investments will be raised by 2 percentage points to 8 to 12 percent, with the benefits given to all companies regardless of their size. Adding to cutting-edge equipment, technologies related to chip testing and designing are also expected to enjoy more tax deductions.

“Tax deductions need to be further extended considering the US is seeking to offer up to 40 percent of tax deductions for new facility investments,” said Yoo Hwan-ik, an industry division chief at the Federation of the Korean Economies, a business lobby here.