Yoon unveils $19 bn support program for chip industry

[Photo provided by Presidential Office]

South Korean President Yoon Suk Yeol unveiled a 26 trillion won ($19 billion) support plan for the country’s semiconductor industry on Thursday, as the global competition to attract high-tech industries intensifies.

The comprehensive chip support package includes establishing a 17 trillion won low-interest loan program via investments from the state-owned Korea Development Bank (KDB), as well as the creation of a 1.1 trillion won semiconductor ecosystem fund to support investment and research and development (R&D) in areas that are considered weak points of the Korean industry, such as materials, components, equipment, and fabless (design) sectors.

The government will also invest more than 5 trillion won in fostering semiconductor talents over the next three years and allocate at least 2.5 trillion won to ensure the rapid construction of the Yongin Semiconductor Mega Cluster by accelerating support for road, water, and power infrastructure.

“We will go all-out for semiconductors on the national front,” Yoon said during a meeting to discuss economic issues held at the presidential office in Yongsan, Seoul on Thursday. “The comprehensive 26 trillion won semiconductor industry support program will greatly alleviate the liquidity issues that arise when companies invest heavily in facilities such as new factories and line expansions, as it encompasses financing, infrastructure, R&D, and support for small and medium-sized enterprises (SMEs).”

Responding to criticism that the government‘s support package only benefits large conglomerates in the chip sector, Yoon described semiconductors as key to the growth of the national economy.

“More than 70 percent of the benefits from this semiconductor support program will go to SMEs,” Yoon emphasized. “As corporate investment expands and profits increase due to tax support, people will enjoy better quality jobs, which will revive livelihoods and increase tax revenue. Semiconductors are key to people’s livelihoods.“

The government also formalized the extension of the K-Chips Act (Restriction of Special Taxation Act), which is set to expire at the end of 2024.

The K-Chips Act returns 15 to 25 percent of taxes to companies that invest in facilities for national strategic technologies such as semiconductors, secondary batteries, and electric vehicles.

The tax rate will increase to 25 to 35 percent when combined with the temporary investment tax credit that adds an additional 10 percentage points for increased investments during the year. The government is leaning towards extending the K-Chips Act for three more years through a tax law revision.

”Tax credits are like subsidies as the government reimburses a certain percentage of R&D and facility investment costs,“ Yoon said.

He also promised to expedite the establishment of the Yongin Semiconductor Mega Cluster by building infrastructure, including electricity, water, and roads, quickly.

The chip industry welcomed the government plan. ”The financial support and extension of the investment tax credit will create favorable conditions for the completion of the semiconductor cluster,“ an industry insider said, stressing the need for its prompt implementation given the global competition to support the semiconductor industry.