Don’t miss the golden time

Park Jea-gun
The author is a professor of electronic engineering at Hanyang University and president of the Korean Society of Semiconductor and Display Technology.

Until 1990, the United States accounted for 39 percent of global semiconductor sales and 37 percent of production. In 2019, while the U.S. sales share rose to 47 percent, its production share fell to 12 percent. In the meantime, Korea ranked the second in the world in chip sales with 19 percent and has the top production share of 22 percent.

The U.S. is a semiconductor “design powerhouse” but relies on Taiwan and Korea for production of advanced semiconductors. America’s dependence on overseas chip production resulted in shortages of automobile and IT semiconductors during the pandemic, halting operations in automobile and IT industries in the U.S. Also, China’s efforts in the semiconductor industry led to an awareness that an economic and security crisis may arise in the U.S.

The U.S. Congress passed the CHIPS for America Act and the American Foundries Act, providing 59 trillion won ($52.2 billion) for five years from 2022. Major tax benefits are offered to companies regardless of the nationality — such as Intel, Taiwan’s TSMC and Korea’s Samsung Electronics — to bring production facilities to the U.S.

About 50 percent of the 44 trillion won allocated to production and R&D in the U.S. will be intensively offered in 2022. The U.S. is aware of the urgency, with 14 trillion won earmarked for founding a national semiconductor center and training and educating an R&D workforce will be provided in equal amount for 5 years. The U.S. recognizes that semiconductor technology and workforce training need to be implemented in a long term.

The Moon Jae-in administration announced the so-called “K-semiconductor strategy” for enhanced competitiveness in May. It includes tax credits, regulatory reform, infrastructure support, human resources training, semiconductor ecosystem, preoccupation of the next-generation semiconductor technology. According to the plan, the government is to provide 380 billion won in R&D funds from 2022. With this budget, it is hard to catch up with America’s semiconductor technology. Semiconductor production process and next-generation package technology development requirore. A fund of at least 2.5 trillion won is needed for stable research and training of the workforce for the next five years.

Regulations hindering investments in semiconductors need to be relaxed. Building R&D and production facilities in the greater Seoul area, where semiconductor companies are concentrated, will take far longer than the case of the U.S., where it is expected to take less than two and half years. To solve the problem, laws related to semiconductor R&D and production facility construction in the greater Seoul region need to be eased and simplified. It is worth referring to the case of the State of Arizona which gives a priority assistance to water, power and construction infrastructures to help semiconductor factories of Intel and TSMC.

In order for the semiconductor industry to be globally competitive, a five-year plan for tax credit, infrastructure support, deregulation, R&D and workforce training is necessary, as in the case of the U.S. The proposed special act on the development of the semiconductor industry in Korea contains these ideas. Some lawmakers raise concerns that the special act gives preferential benefits to Samsung Electronics and SK hynix, but it is a short-sighted view not recognizing the importance of the chip industry.

Korea leads the global semiconductor industry in sales and production, but to maintain or move forward, the same level of national support as the competitors such as the U.S. is needed. The special act to support the semiconductor industry is a bill that will determine whether the domestic industry will grow bigger or lose competitiveness and be eliminated. The bill does not support certain companies but provides long-term support for the overall semiconductor materials, parts and facilities industry. It must be passed in the regular session of the National Assembly in September.