Calls mount for new gov’t to actively support domestic chip firms

Huawei Ascend 910 chip. (Yonhap)

Calls are mounting for the new South Korean government to actively support domestic semiconductor companies through swift legislation and financial support as massive government support lies at the foundation of advanced semiconductor development in both the United States and China.

The United States views the semiconductor industry as a pillar of national security and economic strength, enacting the CHIPS Act in 2022 that provides up to a 25 percent tax credit and billions of dollars in direct subsidies to companies building semiconductor factories in the United States.

For its part, China is fostering its domestic semiconductor firms through vast direct investments, launching the third phase of its national semiconductor fund totaling 344 billion yuan ($47.75 billion) in 2024.

Using this as seed funding, local governments and state-owned enterprises directly invest in semiconductor firms, enabling Chinese companies to commit fully to research and development (R&D) even while incurring large deficits.

A prime example is Chinese firm Lisuan Technology’s announcement on Wednesday that it successfully developed a 6 nanometer (nm) graphics processing unit (GPU).

The company’s G100 GPU for PCs is notable for being built on a proprietary architecture - not on ARM or Intel platforms. Featuring a hybrid architecture combining GPU and neural processing unit (NPU) functions optimized for artificial intelligence (AI) inference, it is expected to significantly influence the development of China’s AI capabilities.

China’s efforts in AI chip development go beyond this, however. Huawei Technologies Co. released both the Ascend series for AI data centers and the Kirin series for mobile devices, with its Ascend 910D chip performing at roughly 60 percent of the level of U.S. tech giant Nvidia Corp’s H100 to cast doubt on the effectiveness of U.S. semiconductor export controls.

U.S.-based Micron Technology Inc. is also rapidly catching up with Korea, the global leader in memory semiconductors. Micron announced on Wednesday that it has become the first company worldwide to supply LPDDR5X chips based on a sixth-generation process to customers.

Designed for mobile devices, the chip offers low power consumption, high data transfer speed, and wide bandwidth - key for AI computation and multitasking performance. Micron notably used a “1-gamma” process, which corresponds to the 10nm-class “D1c” process used by Korean chip makers Samsung Electronics Co. and SK hynix Inc.

Given these moves by global players, experts noted that the new Korean administration must swiftly pass relevant legislation and provide fiscal support to back domestic semiconductor firms.

“Investment in the foundry industry is only possible when customer orders are secured,” Lee Jong-hwan, a professor of system semiconductor engineering at Sangmyung University, said. “Just like Taiwan’s TSMC, where trust with U.S. big tech companies is crucial to success, the government should actively use diplomatic channels to help secure clients.”

Professor Park Jae-geun of Hanyang University emphasized that “the most urgent task for now is the prompt passage of the Special Semiconductor Act.”

He also suggested that in order to foster materials, components, and equipment (MCE) companies, the government should provide subsidies for developing globally competitive products, tax benefits for mergers and acquisitions (M&A) between small and mid-sized firms, and income tax reductions to narrow their wage gap with large corporations.

The industry has high expectations for that Lee will live up to his campaign promises. He unveiled semiconductor industry support as his first policy pledge after being nominated as the Democratic Party of Korea’s presidential candidate on April 28th, 2025.

However, a key point of contention remains whether to include exemptions from the country’s 52-hour workweek rule in the Special Semiconductor Act. The Democratic Party decided to move forward with a bill that includes only support measures without introducing a workweek exemption clause.