The South Korean government announced on July 21 that it would increase tax incentives related to R&D and facility investment in the semiconductor industry so that companies in the sector can invest at least 340 trillion won by 2026.

윤석열 대통령이 6월 7일 서울 용산 대통령실 청사에서 반도체 포토마스크를 살펴보고 있다. / 연합뉴스
South Korean President Yoon Suk-yeol examines a semiconductor photomask.

Since its inauguration, the Yun government has repeatedly emphasized that it will foster and protect the semiconductor industry from the point of view of national economic security. In terms of trade competitiveness, semiconductors account for more than 20% of Korea's 15 major export items. At a press conference to commemorate the 100th anniversary of his inauguration held on the 17th of this month, President Yoon said, "Semiconductors are the core of future industries and national security assets."

In addition, it is planning to open a semiconductor engineer training center within this year in order to supply more than 150,000 experts for 10 years to come, help South Korean companies increase their share in the global non-memory chip market from 3 percent to 10 percent by 2030, and help them reduce their dependence on imported materials, components and equipment from 70 percent to 50 percent or so.

According to the government, the floor area ratio of industrial complexes in the sector will be raised from 350 percent to 490 percent. “This is to increase clean room facilities in Pyeongtaek and Yongin from 12 to 18 and from 9 to 12, respectively,” it explained, adding, “This is expected to create 9,000 jobs.”

The tax deduction rate applied to large semiconductor companies’ facility investment will be raised from 6 to 10 percent to 8 to 12 percent. In addition, in September, 64-hour workweek as an alternative to 52-hour will be expanded to every R&D activity in the industry from R&D related to items subject to Japan’s export restrictions.

The number of specialized graduate schools will be increased next year and the government will provide them with equipment, labor costs, etc. Dual majors and minors for students not majoring in semiconductor will be opened in 30 colleges this year. From 2023 to 2032, the government will prepare 350 billion won with the private sector in order to support R&D at graduate schools and train their graduate students.

When it comes to non-memory chip R&D, 450 billion won and 500 billion won of preliminary feasibility studies will be launched in 2024 to 2030 in the power and automotive semiconductor segments, respectively. In addition, 1.25 trillion won will be invested in AI chip R&D for seven years to come and 1.5 trillion won will be invested in 30 promising fabless companies.

As for material, component and equipment clusters, the second Pangyo cluster project will be launched next year and the same projects in the same area and Yongin will be initiated in 2024 and 2026, respectively. The total area of the clusters is expected to be 148,000 square meters.