[Editorial] Support chip sector

Chip infrastructure, R&D require timely government budget, investment

South Korean chipmakers have secured an indefinite waiver for US chip equipment exports to China. The eased US controls are clearly a positive turn of events. But the Korean government, keen to shore up its vital chip sector, is in no position to feel relieved.

On Monday, the presidential office said Samsung Electronics and SK hynix will be allowed to keep providing US chip equipment to their Chinese factories indefinitely without a separate approval process.

The US government designated Samsung's and SK hynix’s chip factories in China as “verified end users,” a status that greatly reduces the licensing burden on the Korean firms running factories in China.

The two chipmakers welcomed the US government’s move, saying it will remove much of the uncertainties about their operations in China.

The Korean government, which played a role in coordinating negotiations with the US, also gave a positive appraisal to the development, saying that “the biggest trade issue for semiconductor companies has been resolved.”

The government has long made efforts to help the domestic chip industry stay competitive in the global market. Chip exports make up an important chunk of the country’s total exports. One estimate projects that a 10 percent decrease in Korea’s chip exports would lead to a 0.78 percent reduction in gross domestic product.

In October last year, the US announced a set of rules designed to restrict exports of certain chip manufacturing gear to China. The restrictions are related to the intensifying competition between the US and China in the high-tech sector, which is affecting the way foreign manufacturers do business in China, including Korean chipmakers.

Samsung and SK hynix earlier received a one-year waiver amid worries that such limited license would be a serious stumbling block to their operations and investment in China.

Now that the firms have received an indefinite waiver, one major obstacle has been cleared. However, the outlook for the semiconductor sector is far from rosy. The Yoon Suk Yeol government has repeatedly stressed the importance of the semiconductor sector and its substantial impact on a wide range of technology fields.

In July last year, the government unveiled a major strategy to solidify the country’s semiconductor business. This year, it designated seven high-tech industrial hubs across the nation, including two areas dedicated to semiconductors.

“Strengthening competition in the semiconductor sector is a national agenda,” Yoon said earlier. “The government has to craft an appropriate system and build the proper infrastructure to draw companies, investment and talent.”

But it is baffling that the government still has failed to take specific action. Particularly disappointing is the inaction regarding semiconductor infrastructure.

According to the National Assembly and government data, the two planned semiconductor hubs require a total of 1.2 trillion won ($896 billion) in infrastructure investment next year. But the government has earmarked nothing in its 2024 budget for the infrastructure investment. Nor has it held any coordination meetings with local administrations in Gyeonggi Province and North Gyeongsang Province to discuss details about the chip hubs.

The government’s official position is that it will consider drawing up support plans only if a specific business plan is produced -- a stance that contradicts its earlier pledge to fully support the chip sector for the nation’s overall technology competitiveness.

Meanwhile, governments in the US, China, Taiwan and Japan are acting more aggressively to help their chip industries advance in a way that signals tougher competition for Korean chipmakers. Foreign governments are offering chipmakers not only generous tax benefits, but also well-connected infrastructure.

The Korean government is also reluctant to set aside money for semiconductor R&D. According to the Trade Ministry, the government slashed next year’s budget for five R&D projects in the chip sector by an average of 18 percent. The budget for developing the core intellectual property of system chips was cut by a whopping 83.5 percent.

Policymakers must recognize the significance of chip infrastructure and R&D and realize that timely investment is a make-or-break issue for the domestic chip industry.

By Korea Herald(khnews@heraldcorp.com)