[Reoperation on K-Chips Act] Will the Government's Bold Tax Credit Lead to the Revitalization of Specialized Complexes?

Government Revises Semiconductor Investment Tax Credit Rate
15% for Large Corporations with Additional Up to 10%

Government Plans Semiconductor Specialized Complex
Challenges Include Workforce Training and Chip4 Participation

[Asia Economy Reporter Kim Pyeonghwa] Although the government announced plans to focus on creating semiconductor specialized complexes and nurturing talent this year, semiconductor companies disappointed with the 'K-Chips Act (Semiconductor Special Act)' showed little expectation. In response, the government expressed its determination on the 3rd to significantly revise the K-Chips Act. The tax credit rate for national strategic technology investments will be drastically increased from 8% to up to 25% for large corporations. For small and medium enterprises, it will be as high as 35%.

Renewed Interest in Specialized Complexes Following Government Announcement

The government is promoting the establishment of specialized complexes as a major semiconductor-related project for the new year. This includes fast-tracking permits related to the creation of specialized complexes, supporting infrastructure and facilities construction, nurturing manpower, and providing tax credits for facility investments and research and development (R&D). The semiconductor industry expected increased business benefits from the establishment of specialized complexes. This is because several local governments such as Incheon, Busan, Gyeongbuk, and Gwangju-Jeonnam, which are competing to attract semiconductor specialized complexes, have been pouring out support measures during the competition.

The government plans to secure new sites 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 of specialized complexes in the first half of this year. The permit processing period for specialized complexes has also been reduced from the existing 30 days to 15 days. However, there were concerns that even if semiconductor specialized complexes are designated within the first half of the year, industry participation might not be high. This was because the tax credit rates included in the amendment to the Restriction of Special Taxation Act, passed by the National Assembly plenary session on the 23rd of last month, were lower than industry expectations. However, the atmosphere changed with the announcement on the 3rd. Now, detailed discussions need to be actively pursued.

Samsung Electronics Pyeongtaek Campus view / Photo by Samsung Electronics

"Securing Educators Necessary for Training High-Level Talent"

Industry insiders are voicing various demands regarding the government's semiconductor talent development projects. 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 has suggested alternatives such as accelerated education that condenses existing curricula, pointing out that this is largely insufficient for securing core high-level talent. Although the Ministry of Education announced last week an increase of 1,303 master's and doctoral quotas in advanced fields including semiconductors, opening the possibility of securing high-level talent, there are also criticisms of limitations. Even though existing regulations were relaxed to allow quota increases as long as educator recruitment rates are met, the fundamental problem lies in securing educators.

Lee Hyukjae, President of the Korean Institute of Electrical 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 rapidly increase educators immediately, we can consider supporting costs and securing those with sufficient experience in companies as educators."

Late Participation in ‘Chip4’, China Risk Remains a Challenge

The government has yet to resolve measures in response to its official participation in Chip4. This is because Japan and Taiwan, Chip4 member countries, have already aligned closely with the United States and are reaping practical benefits from the semiconductor supply chain reorganization, while Korea joined relatively late. Given the significant proportion of the domestic semiconductor industry's business in China, the government must address risks such as Chinese retaliation or profit reduction, but no clear government solution has emerged yet, which 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."