South Korea is making a strong move to secure its position in the global semiconductor market with a comprehensive support program worth 26 trillion won ($19 billion). President Yoon Suk Yeol announced the initiative during the second economic issue review meeting on May 9, highlighting the strategic importance of the semiconductor sector for national economic stability and growth.
Strategic Shift to System Semiconductors
In a statement, President Yoon emphasized the critical role of semiconductors in South Korea’s economy. He highlighted the importance of proactive measures to mitigate risks associated with global economic fluctuations. “Our country’s economic dependence on foreign countries is very high, and it is sensitive and greatly affected by even small fluctuations in the global economy. Therefore, even small risk factors must be thoroughly checked in advance,” President Yoon stated.
President Yoon, in his forward-looking approach, stressed the necessity of adapting to global market changes and focusing on system semiconductors, which command two-thirds of the market. Despite South Korea’s stronghold in memory semiconductors, he acknowledged the country’s need to catch up in the fabless and foundry sectors, where leaders like TSMC currently dominate. He underscored the importance of an industrial strategy that extends beyond CPUs and GPUs to encompass AI semiconductors.
Comprehensive Support Program for Semiconductors
Recognizing the semiconductor industry as a battleground for national economic strength, President Yoon detailed a comprehensive support program worth $19 billion. This program includes financial support, infrastructure development, research and development (R&D) funding, and targeted assistance for small and medium-sized enterprises (SMEs) in the semiconductor sector.
Key Components of the Semiconductor Support Program
- Financial Support: The Korea Development Bank will establish a new financial support program worth 17 trillion won. This initiative aims to address liquidity issues faced by companies investing heavily in new facilities and line expansions.
- Tax Credits: To ensure continuous investment in R&D and facilities, the government will extend existing tax credits, effectively providing subsidies to support these critical investments.
- Infrastructure Development: The creation of semiconductor mega clusters will be accelerated, with the government taking responsibility for the rapid development of essential infrastructure such as electricity, water, and roads.
- Stable Electricity Supply: Recognizing the crucial role of stable and high-quality electricity in semiconductor production, President Yoon called for the swift passage of the National Power Grid Special Act to shorten the construction period for transmission lines.
- Support for SMEs: A semiconductor ecosystem fund worth 1 trillion won will be established to support promising fabless and SME companies, helping them grow into global players. Additionally, shared demonstration infrastructure, like mini fabs, will be developed to meet industry needs.
Industry Concerns and Misconceptions
Addressing concerns about government support being perceived as benefiting large corporations, President Yoon clarified that over 70% of the support program is directed toward SMEs. He emphasized that expanding tax support will stimulate investment, enhance the semiconductor industry ecosystem, increase corporate profits, and create quality jobs, ultimately benefiting the broader economy.