The author is the head of the industry 1 team of the JoongAng Ilbo.
The government’s efforts to legislate the special law on semiconductors has slowed drastically. It feels clearly different from the Korea-U.S. summit or the K-semiconductor strategy announcement. On May 13, before the Korea-U.S. summit, the government presented its so-called “K-semiconductor strategy.” It outlines the semiconductor R&D and facility investment tax exemption, regulatory overhaul, assistance for water and electricity, workforce training, industrial boost and next-generation technology development assistance.
The government’s subsidy is earmarked at only 500 billion won ($441.5 million) for next generation semiconductor development. Others can be allocated only when the semiconductor special law is passed. The ruling Democratic Party (DP) created a special committee on semiconductors.
But the committee is facing challenges at the moment. There is internal opposition in the DP that only Samsung and SK will benefit if the government offers tax exemptions for R&D facility investment through a special law. The financial authorities are also concerned about a reduction in tax revenue. Last year, Samsung Electronics and SK Hynix reported operation profits of 36 trillion won and 5 trillion won, respectively. The special committee is trapped by the argument over whether it is fair to give the major corporations benefits. As a result, the semiconductor industry proposes that the two companies be encouraged to invest in training their workforce and building an ecosystem as much as they benefit from tax exemption.
Another concern is the possibility of being involved in trade disputes, including lawsuits filed with WTO, if the semiconductor industry is specifically assisted. It is reasonable as the WTO agreement on subsidies defines a tax exemption on facility investment as a subsidy. But it is an unnecessary worry. The special committee claims that trade disputes can be avoided by expanding assistance to all future industries such as future cars, 6G communication and biohealth, as well as semiconductors.
It is worth learning from the case of the United States. The U.S. Congress passed the CHIPS for America Act, directly injecting 59 trillion won over five years. Samsung Electronics and Taiwan’s TSMC as well as American companies like Intel, Micron and TI receive assistance. To avoid WTO suits, the U.S. Senate legislated the U.S. Innovation and Competition Act to spend 280 trillion won on batteries, rare earth matter and medicine, as well as semiconductors, for the next five years. The justification is to secure America’s competitiveness and get ahead of China in these core technologies of the future.
Assistance for semiconductors is an investment in the Korean economy’s growth engine and jobs. The U.S. and Taiwan have come up with many bills to secure semiconductor leadership. In Japan, representatives are busy legislating bills to assist the semiconductor industry.
The government and the National Assembly must resist the narrow-minded perspective of “giving preferential benefits to big corporations” and speed up the legislation with a sense of responsibility to protect the future economy.