South Korea Allocates $13 Billion to Boost Semiconductor Industry Amid Global Competition

The South Korean government has announced a significant investment initiative aimed at bolstering its semiconductor industry, amidst intensifying global competition. Beginning in July, the government will launch an investment programme worth 18 trillion won ($12.94 billion) to ease financing for semiconductor companies.

This move is part of a broader strategy to maintain and enhance the country’s competitive edge in the global semiconductor market.

The Chosun Daily reports that the financial support package includes extensive funding for semiconductor companies, the extension of favourable loans for three years, and $3.6 billion in investments for research and human resource development until 2027.

By 2027, the government plans to channel investments into the Korea Development Bank to establish a low-interest loan programme totalling 17 trillion won ($12.22 billion), with lending set to commence next month.

This comprehensive support package was outlined during an economic ministers’ meeting on 26 June. The plan elaborates on a 26 trillion won support initiative announced by President Yoon Suk-yeol last month, designed to strengthen the semiconductor industry amid escalating global competition.

The financial support programme will start next month, offering preferential loan rates ranging from 0.8% to 1% for large corporations and from 1.2% to 1.5% for small and medium-sized enterprises. In addition to these measures, the government is also working on extending tax credits for the development of national strategic technologies by three years.

Semiconductor manufacturing might be included in this list of national strategic technologies in the future, as discussed during the meeting.

Background and Future Prospects

This initiative is part of South Korea’s larger plan to invest in and support the semiconductor sector, which has been facing increasing pressure due to heightened global competition. The country is preparing a support package for investments and research in the chip sector, amounting to over 10 trillion won ($7.30 billion).

The broader $19 billion support package for its chip manufacturers highlights the urgent need to stay competitive in the global semiconductor market, which is often described as being in a state of “total war.”

The global semiconductor market has seen a surge in demand, driven by the proliferation of technologies such as 5G, artificial intelligence, and electric vehicles.

This demand has intensified the race among countries and corporations to secure a leading position in the industry. South Korea, home to major semiconductor manufacturers like Samsung Electronics and SK Hynix, aims to leverage this support package to maintain its leadership and drive innovation within the sector.

Strategic Importance

The semiconductor industry is critical to South Korea’s economy, contributing significantly to its exports and GDP.

The government’s proactive approach reflects the strategic importance of semiconductors, not just for economic reasons but also for national security, given the industry’s role in producing critical components for various technologies.

Global Context

The global semiconductor landscape is highly competitive, with countries like the United States, China, and Taiwan also making substantial investments to enhance their semiconductor capabilities.

The United States has introduced the CHIPS Act, aimed at boosting domestic semiconductor manufacturing and research, while China continues to heavily invest in its semiconductor industry as part of its Made in China 2025 initiative.

South Korea’s investment initiative is seen as a necessary step to ensure that its semiconductor industry does not lag behind in this global race. The focus on research and development, human resource development, and favourable financing conditions aims to create a robust ecosystem that can sustain and drive future growth.

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