Gov't announces $12B low-interest loan package for chip industry

The Finance Ministry outlined a 17 trillion won package for low-interest loans for the chip sector intended to foster Korea's industry.

Finance Minister Choi Sang-mok speaks at the economy-related minister meeting on Wednesday. [YONHAP]

The government will start offering low-interest loans with a total value of 17 trillion won ($12 billion) from next month as part of the 26 trillion won support package announced last month to foster the country's chip industry.

The Ministry of Finance and Economy outlined details of financial aid worth at least 18.1 trillion won on Wednesday that includes a low-interest loan program and funds intended to facilitate the chip industry ecosystem.

Chipmakers both big and small, Korean and foreign can begin applying next month for loans from the 17 trillion won fund that come with a borrowing rate as much as 1.5 percentage points lower than existing loans to make facility and R&D investments in the country.

The Finance Ministry said the interest rate will be the lowest in the market and the Korean government will allocate 2 trillion won to cover the low rate.

Seoul is also creating two funds worth 1.1 trillion won to foster the country's chip ecosystem, which has weak points in design and as well as materials and equipment. One of the two funds with a value of 300 billion won will initiate stake investments in chip-designing companies as well as materials, components and equipment from next month.

The support package detailed on Wednesday includes extending and expanding tax credit schemes targeting the development of national strategic technologies. The tax deduction scheme, set to expire this year, is expected to be extended by three years, with eligibility expanding to include technology related to advanced chip materials, components and equipment. It also is looking to provide tax credits for expenditures related to the purchase or rental of chip-related software and leases for R&D-related facilities.

An additional 5 trillion won will be committed to nurturing talent and running R&D projects between 2025 and 2027, said the ministry.

"Today we confirm detailed execution plans by cooperating with related bodies and public institutions following the basic direction of the 26 trillion won chip support package we announced in May to secure leadership in the global chip competition," said Finance Ministry Choi Sang-mok on Wednesday.

The Industry Ministry also announced on Wednesday that it will invest 274.4 billion won in R&D projects related to the advanced packaging of chips.

This will help Korea build competitiveness in high bandwidth memory chips or mobile application processors, for which packaging technology plays a core role in raising the performance.

Korea is following countries like the United States, Japan and China with a state-backed support package to boost its chip industry, as the sector continues to grow as a global strategic battlefield.

BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]