International Competition... "Korea, Tax Benefits Alone Are Not Enough Now" [Semiconductor Support]

[Why&Next] Semiconductor Support... Still Insufficient?
① Has Support for Realizing Yoon's Promised Semiconductor Superpower Emerged?
② Korea's Semiconductor Support Falls Behind Financially... Urgent Need for Drastic Deregulation
③ Experts Say "Facility Investment Tax Credit Rate Must Be Increased"

[Asia Economy Reporter Park Sun-mi] Following the promotion of the semiconductor supply chain alliance Chip4 (Korea, the United States, Japan, Taiwan), the United States has passed the Inflation Reduction Act, signaling a full-scale reorganization of core strategic industry supply chains excluding China. This is creating an environment where the hegemonic competition between the U.S. and China over key industries is bound to intensify.

In particular, the U.S. is strengthening control over core semiconductor technologies to prevent China's semiconductor industry from accessing new technologies, while supporting massive subsidies and tax benefits to significantly expand advanced semiconductor production bases domestically. This could become a turning point that weakens Korea's competitiveness, which currently holds leadership in the memory semiconductor and foundry (semiconductor contract manufacturing) sectors.

There are also concerns that domestic semiconductor companies might prioritize the U.S. as their primary production base. Amid rising interest rates and inflation increasing corporate capital expenditure burdens, if direct government subsidies or tax benefits are provided for building or expanding new semiconductor production facilities, there would be little reason to choose Korea, which has high regulatory barriers.

Semiconductors, often called the "rice of modern industry," are a core industry of the Korean economy, making it clear why they must be protected. The global semiconductor industry is valued at approximately $600 billion, showing a high growth rate of 24.2% last year. During the same period, Korea's semiconductor exports accounted for 19.9% of the total, reflecting its significant share. Semiconductors have been Korea's top export item for nine consecutive years, driving economic growth.

However, despite the large scale, the fundamentals are not solid. Korea holds 59% of the memory market (71% DRAM, 47% NAND), ranking first globally. Its overall semiconductor market share is 20%, second after the U.S. (50%), ahead of Japan (9%) and Taiwan (8%). Yet, the entire semiconductor industry ecosystem?including companies, workforce, technology, and materials, parts, and equipment (MPE)?is considered vulnerable.

▲ Insufficient support compared to competing countries and various regulations hindering corporate growth ▲ Severe workforce shortages in both quantity and quality that fall short of industry demand ▲ Weakening of the memory sector's super-gap status due to competitors' advances and the widening gap with leading countries in the non-memory (fabless, foundry, back-end) sectors are urgent issues that need immediate improvement.

The Korean government is preparing various support measures to develop the semiconductor industry evenly, recognizing its clear strengths and weaknesses. The new administration's strategy to achieve semiconductor superpower status, the National Advanced Strategic Industry Special Act, and the Semiconductor Industry Competitiveness Enhancement Act promoted by the ruling party are emerging as key solutions to nurture Korea's representative competitive semiconductor industry. However, while the goal and direction to further grow the semiconductor industry through policy support are correct, the general consensus is that the scope of support is insufficient to resolve the practical difficulties faced on the ground.