[Retreated K-Chips Act]③ Government Expands Specialized Complexes with Reduced Tax Credits... Industry Responds 'Not Sure'

Reduced Tax Credit Rate for Semiconductor Specialized Complex
Securing Educators as Important as Skilled Workforce
Late Chip4 Participation... Lack of Risk Response

[Asia Economy Reporter Kim Pyeonghwa] Although the government announced plans to focus on creating semiconductor specialized complexes and nurturing talent in 2023, the semiconductor industry's on-site sentiment remains lukewarm, having already been disappointed by the 'K-Chips Act' (Semiconductor Special Act). The new plan also failed to include alternatives to the China risk following the government's official participation in 'Chip 4.'

One of the major semiconductor-related projects the government will promote from the new year is the establishment of semiconductor specialized complexes. This includes expedited processing of permits related to the complexes, support for infrastructure and workforce development, and providing tax credits related to facility investment and research and development (R&D). The semiconductor industry had expected increased business benefits from the creation of these specialized complexes. This is because several local governments, including Incheon, Busan, Gyeongbuk, and Gwangju-Jeonnam, competing to attract semiconductor specialized complexes, were pouring out support measures.

The government plans to secure new sites starting this year to build additional semiconductor industrial complexes. The Ministry of Trade, Industry and Energy, the main department in charge, aims to complete the final designation by the first half of this year. The permit processing period for the specialized complexes has also been reduced from the existing 30 days to 15 days. However, there are significant conflicts of interest even at the basic stage of securing new sites, raising doubts about whether the creation of specialized complexes can be accelerated. Even if semiconductor specialized complexes are designated within the first half of the year without delay, industry participation may not be high. Although the amendment to the Restriction of Special Taxation Act, which serves as the basis for the main tax credit support for the specialized complexes, passed the National Assembly plenary session on the 23rd of last month, the credit rate is lower than the industry's expectations.

The government's semiconductor workforce development project, which will be in full swing in the new year, is also evaluated as insufficient on-site. The government intends to focus on nurturing practical talent through related ministries such as the Ministry of Trade, Industry and Energy and the Ministry of Education. On the other hand, the field points out that alternatives such as condensed education based on existing curricula are insufficient for securing core advanced personnel. Last week, the Ministry of Education opened the possibility of securing advanced talent by announcing an increase of 1,303 master's and doctoral quotas in advanced fields including semiconductors, but this too has limitations. Although existing regulations were relaxed to allow an increase in quotas as long as the teacher recruitment rate standard is met, the fundamental problem lies in securing teachers.

Lee Hyuk-jae, president of the Korean Institute of Electronics Engineers, said, "To secure talent, the number of professors who can teach must increase accordingly, but the reality is that there is a shortage," adding, "Since it may be difficult to quickly increase the number of teachers immediately, we can also consider supporting costs to secure those with sufficient experience in companies as professors."

The government has yet to resolve measures in response to its official participation in Chip 4. This is because Japan and Taiwan, Chip 4 participating countries, have already aligned with the United States and are reaping practical benefits from the semiconductor supply chain reorganization, while Korea joined relatively late. Since the domestic semiconductor industry's business proportion in China is considerable, it is necessary to respond to risks such as Chinese retaliation or profit reduction, but the lack of clear government measures is a cause for concern.

Regarding this, SK Group Chairman Chey Tae-won expressed difficulties at a Korea Chamber of Commerce and Industry press conference last month, saying, "The security alliance with the United States is important," but also noting, "It is a dilemma situation where we cannot neglect or exclude China, our number one economic partner."