Fears grow that advanced industries bills will be scrapped

[Graphics by Song Ji-yoon]

South Korea is likely to scrap bills aimed at supporting advanced industries, including semiconductors, en masse as the country’s 21st National Assembly ends on Wednesday after being embroiled in political disputes until the bitter end.

According to sources from the National Assembly on Monday, a bill to extend the K-Chips Act (a revision to the Act on Restriction of Special Taxation), a representative semiconductor support bill, has been stalled in the National Assembly’s Planning and Finance Committee since it was proposed by Representative Kim Hack-yong of the People Power Party in January 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, and is set to expire at the end of 2024. Although efforts were made to extend the legislation for six years until 2030, it failed to pass the relevant standing committee.

Concerns arise that even if the legislation is reintroduced in the incoming 22nd National Assembly, it may not be enacted within 2024 given the schedule of national audits.

While major countries like the United States, Japan, and even China are going all-out to provide subsidies to attract advanced industries, there is a growing likelihood that companies in Korea will even lose existing tax benefits.

The Korean government thus plans to push for a three-year extension of the K-Chips Act via a tax law revision that is separate from the already proposed bill.

A special bill to expand the national power grid to supply electricity to the world‘s largest semiconductor cluster that is being constructed in Yongin, Gyeonggi Province, is also due to be scrapped. The bill aims to speed up the power grid construction period by 26 months by forming a grid expansion committee under the Prime Minister’s Office and speeding up the government-led site selection, but no progress has been made since it was proposed in October 2023.

The Artificial Intelligence (AI) Basic Act (AI Industry Promotion Act), which provides the foundation for nurturing and supporting the AI industry in the country, will also likely be scrapped after languishing in the National Assembly since its introduction in late 2022.