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R&D push shows shift toward big companies

Aug 09,2019
The government will boost support for big businesses in research and development (R&D) in a bid to reduce dependence on overseas materials.

After Japan’s export restrictions exposed the Korean manufacturing sector’s reliance on imported materials, the Ministry of Trade, Industry and Energy announced Thursday that it will make changes to government support for R&D, which has historically favored small companies.

According to the planned changes, the government will support up to 66 percent of the cost of state-sponsored R&D projects pursued by companies with assets of over 10 trillion won ($8.3 billion), up from the current 33 percent limit. Now large companies will be eligible to receive the same support as small companies.

The government added that it will provide up to 50 percent of the funding for projects aimed at introducing overseas technology currently unavailable in Korea.

It will also ease administrative processes to quickly provide the needed funding.

The government also announced that it will encourage active research in state-led projects by abolishing some annual evaluations.

The announcement is the latest step in the government’s efforts to help local R&D. Earlier this week, it said it will provide 7.8 trillion won over the next seven years for research. Seoul seeks to establish by 2024 a stable supply of 100 key industrial materials affected by Japan’s new trade restrictions.

The aggressive support suggests an urgency to expedite the local development of industrial materials.

Tokyo decided last Friday to take Korea off its list of preferential trade partners. The move is expected to tighten exports of nearly 1,200 product categories to Korea from Aug. 28.

The Korea Institute for International Economic Policy (KIEP) said in a recent report that Korea imported last year $31.5 billion worth of materials to be affected by Japan’s restrictions. This amounts to 57.7 percent of the total Japanese imports of $54.65 billion.

According to Yuanta Securities Korea, 92 percent of photoresists, one of the three materials restricted by Tokyo last month, were from Japan this year.

While Seoul confirmed Thursday that Tokyo has approved an application for exports of the material, the latest plan highlights the focus to reduce dependence on Japan.

Analysts believe Tokyo’s export measures will ultimately have a limited impact on the local semiconductor industry in the long run.

“Samsung Electronics’ semiconductor inventory is worth 15 trillion won,” wrote Lee Jae-yun, an analyst at Yuanta Securities Korea, in a report released Wednesday. “There will be no supply problems until the end of the year.”

“Samsung Electronics and SK Hynix are expected to focus on increasing local production of materials that have a high level of overseas dependency, so this is good news for the local materials industry in the long term.”

The government’s latest plan also falls in line with a recent shift to support big business in the wake of the deepening trade row, as opposed to its earlier emphasis on a fair economy and support of smaller companies.

It announced plans last month to increase tax deduction rates for large corporations making investments into facilities improvement. Companies worth over 10 trillion won make about 80 percent of the country’s facilities investment.

BY CHAE YUN-HWAN [chae.yunhwan@joongang.co.kr]


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