[Initial Insight] Semiconductor Direct Subsidies Should Not Be Hesitated

To Maintain Global Market Competitiveness
Current Low-Interest Loan Supply Measures Are Insufficient
Subsidy Policies Like Those in the US and Japan Should Be Considered

The government has decided to provide low-interest loans amounting to 4.3 trillion won in next year’s budget to ensure that funds can be quickly supplied to the semiconductor industry. However, since the policy announcement, voices of both welcome and disappointment have emerged within the industry. The reason is that loan support alone is not sufficient to maintain competitiveness in the global semiconductor market.

Kwangho Lee, Head of the Industrial IT Division Corporate Team

Currently, major countries view the semiconductor industry as a core future national competitiveness sector and are competitively expanding investments based on massive subsidies. The United States enacted the ‘Chips and Science Act’ in 2022, securing about 73 trillion won in subsidies, loans, and guarantee funds. Through this, the U.S. is actively investing in semiconductor production, research and development (R&D), and workforce training domestically, while also providing substantial subsidies to major global semiconductor companies. For example, Microchip received $160 million, GlobalFoundries $1.5 billion, and Intel $20 billion in subsidies. This large-scale support demonstrates the U.S.’s strong determination to take global leadership in the semiconductor industry.

Japan is also providing large-scale subsidies to strengthen the competitiveness of its semiconductor industry. The Japanese government established the ‘Emergency Strengthening Package for Semiconductor Industry Infrastructure’ in 2021, creating about 15 trillion won in manufacturing facility subsidy funds. Through this, in 2022, approximately 4.4 trillion won was granted to TSMC’s first plant established in Japan, and in 2023, about 1.9 trillion won was provided to the U.S. company Micron. This aggressive subsidy policy is a strategic choice for Japan to recover competitiveness in the semiconductor industry and strengthen its position in the global market.

On the other hand, the government’s current loan support, while helpful in improving short-term cash flow by providing low-interest funds, has limitations in encouraging companies to make more aggressive investments or gain an advantage in global competition. Therefore, it is natural that voices are calling for the government to consider additional subsidy policies to support the semiconductor industry. Subsidies can be an effective means to reduce companies’ financial burdens while inducing bold investments.

Recently, lawmakers from both ruling and opposition parties, as well as experts, have proposed reviewing direct subsidy support for the semiconductor industry. Ko Dong-jin, chairman of the People Power Party’s AI and Semiconductor Special Committee, introduced the ‘Special Act to Strengthen Semiconductor Industry Competitiveness,’ which includes direct government subsidies to semiconductor investment, technology development, design, manufacturing, and supply companies. Similarly, Kim Tae-nyeon of the Democratic Party proposed a bill to comprehensively support the semiconductor industry.

Experts also emphasize the need for a more proactive and innovative shift in thinking regarding support for advanced industries. Lee Sung-yeop, a professor at Korea University’s Graduate School of Technology Management, stated at the recent ‘Advanced Industry National Strategy Seminar’ that “since each semiconductor fab (factory) requires an investment exceeding 20 trillion won, it is necessary to consider direct government subsidies to companies, as major countries do.”

As the semiconductor industry is a key sector that will determine the future of the Korean economy, the government must prepare support measures from a long-term and strategic perspective. There is no eternal number one in the semiconductor industry, and the current situation of Intel, trapped in the ‘curse of being number one,’ must not become the future of Korean semiconductor companies. Without groundbreaking support, new legends cannot be created.