[Public Voices] Semiconductor Tax Support Adrift in a Vast Ocean

At the beginning of this year, there was welcome news that the government decided to further expand the tax credit for investments in national strategic technologies. This was like a timely rain that could lead to active investments by semiconductor companies, which require large-scale facility investments, thereby strengthening industrial competitiveness. However, this plan is currently adrift, lost at sea.

Amid recent economic recession forecasts, shrinking investments, intensified semiconductor hegemony wars between countries, and fierce competition to secure domestic manufacturing capabilities, the domestic semiconductor industry has requested full-scale government support at a level commensurate with the comprehensive support policies of major competing countries.

Accordingly, the government decided in December to amend the Restriction of Special Taxation Act to increase the tax credit rate for large corporations in national strategic technologies from 6% to 8%. However, the industry strongly opposed this, as it was far below the levels of competing countries such as the United States (25%) and Taiwan (25%), and even lower than the 20% and 10% rates previously proposed by both ruling and opposition parties.

Considering these points, the government announced earlier this year that it would further raise the tax credit for national strategic technologies. Specifically, the plan is to increase the tax credit rate from 8% to 15% for large and medium-sized enterprises, and from 16% to 25% for small and medium-sized enterprises. This tax support policy is expected to serve as a strong driving force for large-scale facility investments by semiconductor companies and to create significant synergy effects on investments and employment in domestic materials, parts, and equipment (SoBuJang) companies.

However, swift passage through the National Assembly is naturally required to realize this. Currently, the bill is stalled due to disagreements between the ruling and opposition parties. The industry’s hopeful anticipation is burning away in frustration.

South Korea’s semiconductor industry is facing a crisis. The country’s long-held position as the number one in memory semiconductors is being threatened by competing countries, and in the non-memory semiconductor and SoBuJang sectors, it still shows overall inferiority. Moreover, with the speed of competition fiercer than ever, the investments made in the coming years will be crucial in determining leadership for the next several decades.

Due to the industrial characteristics of the semiconductor sector, enormous facility investment costs are required, and timely investment is paramount to ensure production proceeds without disruption. Ultimately, it is no exaggeration to say that the answer to overcoming this crisis lies in timely investment tax credits.

As this is a policy the government is enthusiastically pursuing, we hope for its swift passage through the National Assembly, serving as a signal for more sustained investments and further strengthening the competitiveness of the domestic semiconductor industry. Our industry will also do its best in response to the government’s sincere efforts, and we hope for continued careful attention and support from the government for the semiconductor industry in the future.

Jo Jung-hwi, Professor Emeritus, Incheon National University