Korean Government Announces $10 Trillion Support Program for Semiconductor Industry

On the 10th, Deputy Prime Minister and Minister of Strategy and Finance Choi Sang-mok (left) visited HPSP, a semiconductor equipment company in Hwaseong, Gyeonggi Province, and toured the production line with the CEO of HPSP Kim Yong-un. Vice Premier Choi announced today, “We are preparing a semiconductor support program worth more than 10 trillion won to support resource investment and research and development in all semiconductor fields .” / Ministry of Strategy and Finance

The government decided to create a ‘semiconductor financial support program’ worth more than 10 trillion won to support the entire semiconductor industry, including materials, components, and equipment, and fabless (design). The aim is to strengthen the ecosystem of the domestic semiconductor industry in response to the semiconductor war led by the United States.

Choi Sang-mok, Vice Prime Minister of Economy and Minister of Strategy and Finance, held a meeting with semiconductor materials, components and equipment companies in Hwaseong, Gyeonggi Province on the 10th and said, “The creation of eco- semiconductor system more important than anything else. to strengthen the competitiveness of the semiconductor industry. The government is providing policy funding and budget support worth approximately 5 trillion won to the semiconductor industry this year. Here, a support package of ’10 trillion won + alpha (α)’ will be added.

Regarding the financing method, Deputy Prime Minister Choi said, “It is a structure where finance is financed indirectly (rather than directly providing subsidies as in the United States and Japan ). he said. Given the financial conditions for increasing national debt, it is difficult to pay subsidies in cash, and low-interest loans will be used in most cases.

The reason the government decided to extend support for semiconductors is due to the urgent recognition that “the fate of the Korean economy depends on the fate of the semiconductor industry” (Vice Prime Minister Choi). Deputy Prime Minister Choi said at the meeting, “The recent good growth trend (such as the amazing growth rate in the first quarter of this year) has been mainly led by semiconductors,” and he said, “Whether future growth will also be sustainable depends on the ‘perfect semi-circle’ represented by artificial intelligence (AI).” “It depends,” he said.

Government support for the semiconductor industry is expected to focus on the semiconductor post-processing sector, where Korea is relatively weak. Post-processing is the process of drawing a circuit on a wafer (pre-processing), then separating the chips from the wafer, packaging them, and assembling them.

Currently, the government provides policy financing (loans) to semiconductor companies through national financial institutions such as the Korea Development Bank and the Industrial Bank of Korea. The amount of policy finance this year is about 3.6 trillion won. In addition, a budget of 1.3 trillion will be earned to train semiconductor manpower and build infrastructure such as water, power and roads. The total amount won is 4.9 trillion. If the ’10 trillion won + α’ support package is added this time, the level of government support for semiconductors will more than triple.

Graphics = Kim Eui-gyun

The government plans to extend and extend the ‘semiconductor tax credit’ which expires at the end of this year. Currently, domestic semiconductor companies receive tax credits of up to 35% of investments in national strategic technology and up to 50% of research and development (R&D) costs. However, this tax credit rule only applies until the end of this year. The government is considering extending this date and expanding the scope of tax concessions.

The government’s approach to loans and tax breaks differs from the United States and Japan, which provide direct subsidies to companies. The United States is providing a total of $52 billion (about 71 trillion won) in aid to the semiconductor industry under the Semiconductor Assistance Act, and Japan is also providing about 18 trillion won in subsidies. A government official said, “If we have enough finances, we could consider subsidies, but for now, indirect support measures are best. ” He added, “We intend to follow all policy measures within reasonable limits.”

The semiconductor industry welcomes the government’s announcement of additional support measures. Lim Young-jin, CEO of Justem, a semiconductor humidity control system company that participated in the meeting on the 10th, said, “We are very pleased that the government is interested in small and medium-sized companies and provides support on a large scale,” and added, “There has been some support in the past, but this support will enable several “We expect research and development to gain more momentum and progress at a faster pace,” said e.

However, some say that this is not enough compared to the amount of astronomical aid that governments around the world are pouring in, including direct subsidies. A senior executive at a domestic semiconductor equipment company said, “The previous government provided similar support,” and added, “It would be more effective to provide direct and unconventional support to competing companies rather than support or -direct such as tax credits or policy funding.” Another equipment company executive said, “From a long-term perspective, there should be support such as direct subsidies for small and medium-sized companies.”