South Korea unveils US$19-billion support package for semiconductor sector to compete in global chip ‘warfare’

Under the package, a financial programme worth about US$12.46 billion was planned through state-run Korea Development Bank
Seoul aims to help boost the country’s global market share in non-memory chips, such as mobile processors, to 10 per cent from the current 2 per cent

Semiconductors

Reuters

Published: 5:38pm, 23 May 2024

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South Korea on Thursday announced a 26 trillion won (US$19 billion) support package for its chip businesses, citing a need to keep up in areas like design and contract manufacturing amid “all-out warfare” in the global semiconductor market.

Under the package, South Korean President Yoon Suk-yeol said a financial support programme worth about 17 trillion won was planned through state-run Korea Development Bank to back investments by semiconductor companies, according to the presidential office.

“As we all know, semiconductors are a field where all-out national warfare is under way,” Yoon said at a meeting with top government officials. “Win or lose, that depends on who can make cutting-edge semiconductors first.”

South Korea, home to the world’s top memory chip makers Samsung Electronics and SK Hynix, has fallen behind some rivals in areas such as semiconductor design and contract manufacturing.

South Korean President Yoon Suk-yeol attends a press conference marking his two years in office at the presidential office in Seoul on May 9, 2024. Photo: EPA-EFE

South Korea’s share of the global fabless sector – dominated by companies like US giant Nvidia, which designs chips but outsources manufacturing – stood at about 1 per cent, Yoon’s office said. There was also a gap between local semiconductor manufacturers and the leading contract chip foundries like Taiwan Semiconductor Manufacturing Co, it said.

Yoon said a 1-trillion-won fund would be set up to support chip equipment makers and fabless companies.

Minister of Trade, Industry and Energy Ahn Duk-geun said the government aimed to help boost South Korea’s global market share in non-memory chips, such as mobile processors, to 10 per cent from the current 2 per cent.

The new funding package is bigger than plans flagged by Minister of Economy and Finance Choi Sang-mok earlier this month, when he said the government was targeting support for chip investments and research worth more than 10 trillion won.

South Korean Minister of Trade, Industry and Energy Ahn Duk-geun inspects a semiconductor production line during a visit to a SK Hynix plant in Icheon, 56 kilometres southeast of Seoul, on January 11, 2024. Photo: EPA-EFE

In a press briefing, Choi described South Korea’s chip support package “as good as” those of any other country.

Countries around the world ranging from China to the United States have been ploughing tens of billions of dollars via grants and other means to support their own semiconductor sectors.

“The government is apparently trying to follow the trend where other countries are giving out subsidies for their own chip companies,” said Greg Roh, head of research at Hyundai Motor Securities.

South Korea is building a mega-chip cluster in Yongin, south of the capital Seoul, touted as the world’s largest hi-tech chip-making complex to attract semiconductor equipment makers and fabless companies.

Finance minister Choi said the government would streamline bureaucracy and cut red tape to help speed up construction of the chip cluster at twice the normal rate.

In January, Yoon, who has vowed to pour all possible resources into the country’s chip industry, said he would extend tax credits on investments in the domestic semiconductor industry to boost employment and attract more talent.

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