Samsung executive-turned-lawmaker urges support to Korea’s chip sector

Yang Hyang-ja and Lim Hyung-kyu [Photo by Park Hyung-ki]

A former Samsung Electronics Co. president and a Samsung Electronics executive-turned-lawmaker harshly criticized lackluster parliamentary efforts to pass a bill aimed at increasing tax incentives for investment in the semiconductor industry.

For Korean companies to be ahead in global competition for semiconductor technology, significant government support and training professionals who play the role of ‘hidden heroes’ are indispensable, Lim Hyung-kyu, former head of Samsung Electronics and Rep. Yang Hyang-ja who chairs a special parliamentary committee on semiconductors told Maeil Business Newspaper in a recent discussion, saying the bill is far from enough.

The two who had worked at the country’s largest chip maker jointly published ‘Hidden Heroes’, a book that sheds light on Korea’s emergence as a semiconductor powerhouse and the direction the local semiconductor industry should take in today’s competitive landscape.

The bill dubbed as K-Chips Act was initially aimed to support growth in high-tech areas by increasing tax benefits and nurturing more experts in a response to the US government’s efforts to increase onshore chip manufacturing by spending tens of billions of dollars.

But the bill that passed last week disappointed lawmakers, especially Yang, the main author of the bill, and the industry as the benefits was smaller than expected.

The National Assembly’s reformist movement to nurture the country’s strategic industries in the long term lost momentum during the bill negotiation process between ruling and opposition parties.

“The K-Chips Act should not be viewed as subject for political dispute because the bill is to foster the country’s key strategic industry in the long term,’’ said Yang, a former member of the main opposition Democratic Party but now an independent lawmaker. “I felt that some lawmakers have a strong antipathy towards big companies and ‘winners’ in Korean society.”

[Source : Samsung Electronics]

The revision will entitle big companies a tax credit of up to 8 percent from the previous 6 percent for investments in semiconductor manufacturing, which is lower than the 20 percent proposed by the ruling party as well as the 10 percent from the opposition party. The U.S. provides an tax break of 25 percent for investment by chip companies.

Regarding an amendment to the National Advanced Strategic Industry Act, an original plan to increase the number of semiconductor-related university departments in the metropolitan area, was omitted from National Assembly discussions.

“Semiconductor clusters are concentrated in the southern part of Gyeonggi Province. Competitiveness is based on the concentration of industry and education, but is it appropriate to artificially regulate the number of university students?” said Lim.

In the negotiation process, some lawmakers opposed the original plan aimed at expanding the number of students accepted for the semiconductor-related majors, arguing it would be more advantageous for the universities in greater Seoul areas.

The two echoed that the government’s strong will for the semiconductor industry is necessary. “Samsung Electronics is heavily investing in foundry business, and if the company loses this game, the aftermath will be grave,” Lim said. “Rival companies are working together with their governments and we must do the same. A business cannot do it alone,” Lim said, calling for more support from the government.

Lim also said that while the U.S. and Korea are partners in the semiconductor sector currently that situation could change if the U.S. continues to provide huge incentives to companies.