Korea to create world's largest chip manufacturing complex

President Moon Jae-in, fourth from right, poses with government officials and business executives during an event announcing a development plan for the country's semiconductor industry at Samsung Electronics' plant in Pyeongtaek, Gyeonggi Province, Thursday. Korea Times photo by Wang Tae-seok

Korean chip firms to invest over $450 bil.; gov't plans to offer huge tax cuts

By Baek Byung-yeul

The government announced Thursday that it will help establish the world's largest semiconductor supply chain in Korea by 2030 in cooperation with firms in the private sector, including Samsung Electronics and SK hynix, to make the country a global leader in both memory and system chips.

To achieve this auspicious goal, the administration said it will provide huge tax incentives to companies constructing semiconductor facilities, after chip manufacturers vowed to invest more than 510 trillion won ($450 billion) for this and research and development (R&D) by the target year.

The government will offer tax credits of between 40 percent 50 percent for investments into R&D projects for new chip technologies and from 10 percent to 20 percent for spending on new factories.

Under the plan, the government said it will create a so-called "K-Semiconductor Belt" in the western part of the country incorporating Pangyo, Giheung, Hwaseong, Pyeongtaek and Onyang, and the central region connecting Icheon, Yongin and Cheongju. The belt will encompass every scope of the semiconductor business ― manufacturing, materials, components and equipment, and design.

The administration announced the plan at Samsung Electronics' semiconductor plant in Pyeongtaek, south of Seoul, at an event participated in by officials from the government and private sector including President Moon Jae-in, Deputy Prime Minister Hong Nam-ki, Samsung Electronics Vice Chairman Kim Ki-nam and SK hynix Vice Chairman Park Jung-ho.

"Countries around the world are fiercely competing to reorganize their own supply chains. The direction we need to go in is clear. We are trying to make this opportunity ours by making preemptive investments that will not be shaken by external shocks, and strengthening the domestic industrial ecosystem to lead the global supply chain," Moon said during a speech at the plant.

In response to the government's vision of the country becoming a global chip powerhouse by 2030, Samsung Electronics and SK hynix ― the world's Nos. 1 an 2 memory chip makers ― welcomed the support being offered and announced their investment plans.

Samsung said it will spend an additional 38 trillion won to become a leader in both the memory and system semiconductor sectors, bringing its total long-term investment to 171 trillion won. In 2019, the company announced it would invest 133 trillion won in its chip business by 2030.

"The entire semiconductor industry is facing a watershed moment and now is the time to chart out a long-term strategy and investment plan," Samsung's Kim said. "In the memory business, where Samsung has maintained its undisputed leadership position, the company will continue to make preemptive investments to lead the industry."

Samsung recently held a ceremony with Hyundai Motor and the Ministry of Trade, Industry and Energy pledging to jointly work on solving the automotive chip shortage issue, which has been undermining productivity in the global auto industry. Though details have yet to be provided, the industry ministry said the agreement will be a cornerstone in strengthening cooperation.

SK hynix will also double its in 8-inch foundry business capacity in order to support the development, mass production and global market expansion of domestic fabless companies.

President Moon Jae-in speaks during an event announcing the country's chip industry development plan at Samsung Electronics' chip-making plant in Pyeongtaek, Gyeonggi Province, Thursday. Korea Times photo by Wang Tae-seok

The government's announcement to boost the semiconductor industry comes at a time when other countries are providing support measures, including tax benefits, to chip companies to cope with shortages and supply chain deterioration.

On April 12, U.S. President Joe Biden held a virtual meeting with 19 international firms including Samsung Electronics and stressed a need to invest in the U.S. semiconductor industry to secure the country's supply chain.

Bloomberg also reported Tuesday that, the U.S. government will hold a second meeting, participated in by Samsung, TSMC, Google, Amazon, General Motors and Ford, May 21 (KST) to address the specifics of increasing the supply of chips in America.

Given the second meeting will be the day before a summit between President Moon and his U.S. counterpart Joe Biden, industry analysts presume the gathering can be interpreted as the U.S. administration pressuring tech firms including Samsung to invest more in the U.S.

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