South Korea has unveiled a support package to strengthen its semiconductor industry and catch up with international rivals. The plan aims to support large companies and weaker sectors, particularly in the IC design and foundry sectors.
According to reports from the Korea Economic Daily and Hankyoreh, on May 23, South Korean President Yoon Suk Yeol announced a KRW 26 trillion (US$19.1 billion) support package to strengthen the country's semiconductor industry. This initiative aims to boost competitiveness in weaker areas such as IC design and foundry, particularly since South Korea holds only a 1% share in the global IC design market.
The public in South Korea has expressed concerns that the support plan primarily serves as a tax break for large companies. In response, Yoon emphasized that over 70% of the benefits from this comprehensive plan will go to SMEs. He highlighted the essential role of semiconductors in daily life. He argued that tax incentives for corporate investment would help expand the semiconductor ecosystem, boost corporate revenue and tax income, and create more quality jobs.
Yoon highlighted that South Korea's global market share in IC design is only 1%, and its wafer foundry sector still lags behind industry leaders such as TSMC. As a result, he instructed the Ministry of Trade, Industry, and Energy (MOTIE) to devise additional measures to bolster the competitiveness of the system semiconductor industry.
The Comprehensive Semiconductor Industry Support Plan includes financial aid, infrastructure development, R&D, and support for small and medium-sized enterprises (SMEs). South Korea will launch a KRW17 trillion financial support program to assist semiconductor companies with large-scale equipment investments. This program facilitated through banks aims to help companies manage cash flow issues from significant capital expenditures needed for building new factories or expanding production lines.
In addition, Korea will establish a KRW1 trillion Semiconductor Ecosystem Fund to support promising companies in IC design, materials, components, and equipment sectors. The government will also extend investment tax credits set to end in 2024 to support companies in R&D and equipment procurement. South Korea will handle essential infrastructure and accelerate construction for building its KRW622 trillion semiconductor clusters.
South Korean chip giants Samsung Electronics and SK Hynix welcomed the package. Notably, SK Hynix announced the Yongin Semiconductor Cluster project in 2019 but faced delays due to issues with water supply and permits, with the first fab expected to be completed only by 2027.
