[K-Chips Act Facing Reoperation] "Semiconductor Industry, Future Investments Will Determine Performance for Decades"

Government Proposes Additional Tax Credit Measures Up to 35%
Accepts Criticism from Industry Including Korea Semiconductor Industry Association

Vice Chairman Lee Chang-han

[Asia Economy Reporter Park Sun-mi] Although the government has established the K-Chips Act (Semiconductor Special Act) to enhance the competitiveness of the domestic semiconductor industry, the industry still feels that policy support is insufficient. There are growing concerns that the current market share of 20% could be lost if this continues. In response, on the 3rd, the government announced additional measures to provide tax credits of up to 35% for investments in national strategic technologies.

Lee Chang-han, Vice Chairman of the Korea Semiconductor Industry Association, pointed out in an interview with Asia Economy on the 2nd that the government's semiconductor support is grossly insufficient compared to competing countries. Regarding the amendment to the Restriction of Special Taxation Act (RSTA) passed at the end of last year, which raised the tax credit rate for large corporations from 6% to 8%, he said, "This scale is far too small compared to the incentives offered by competing countries." The government has accepted such criticism from associations and the industry.

He explained, "The United States offers a 25% tax credit incentive for domestic facility investments, and China and Japan are also taking strong measures by revising related laws to promise large-scale incentives," adding, "The new government initially promised to remove unnecessary regulations that hinder companies, but currently, Korea is like running a marathon while wearing sandbags." He warned that lower investment and incentives compared to competing countries will lead to a long-term decrease in corporate facility investments, ultimately resulting in a decline in market share.

According to the newly announced government policy, large corporations can receive up to a 25% tax credit, and small and medium enterprises (SMEs) up to 35%. This promises a level of tax credit surpassing that of the United States. He said, "In the semiconductor industry, where speed competition is vital, investments made in the next few years determine performance for decades, so full government investment and support are urgently needed." The government has responded positively to the industry's hopes.

He cited the perception of preferential treatment for large corporations and the metropolitan area as a regrettable aspect of the government's semiconductor policy, leading to stingy support for facility investments that require astronomical costs. Although about 100 billion won has been allocated for infrastructure (power, water, wastewater, roads) in large semiconductor industrial complexes such as Pyeongtaek and Yongin, considering that major advanced countries like the United States and China directly build and operate infrastructure, full support based on global fairness is necessary. Lee emphasized, "Improving investment conditions for semiconductor companies is most urgent to maintain the status of a semiconductor powerhouse."

To overcome the weaknesses of K-semiconductors, which lack competitiveness in system semiconductors and materials, parts, and equipment (SoBuJang), he advised creating dedicated funds for SoBuJang, fabless, and packaging sectors to stimulate investment in vulnerable areas of our industry. He also recommended establishing an R&D cluster encompassing the entire semiconductor industry to discover new R&D items in promising fields such as automobiles, the Internet of Things, and bio. In addition to supporting technology development in new growth areas like power semiconductors, automotive semiconductors, and artificial intelligence (AI) semiconductors, he added that building a win-win cluster between large and small-to-medium semiconductor companies from an ecosystem perspective is necessary.

Lee explained, "TSMC, the world's No. 1 global foundry company, grew through organic cooperation with surrounding fabless companies," and said, "Korea should also build a collaborative ecosystem as a win-win cluster between foundry-fabless and manufacturing-SoBuJang companies." He also emphasized the association's efforts to overcome another weakness of K-semiconductors: industry-tailored human resources. Lee added, "The Semiconductor Association, in cooperation with the government, launched the Korea Semiconductor Academy on the 1st of last month," and said, "The industry will directly participate to intensively train personnel specialized in job functions, ensuring excellent human resources are supplied to semiconductor companies."