Korea's chip industrial policy takes shape with road map

Minister of Trade, Industry and Energy Lee Chang-yang tours Dongjin Semichem in Gyeonggi on Thursday. [YONHAP]

Companies are being pushed by the government to invest more in semiconductors as the new administration seeks to make Korea a chip powerhouse.

Big numbers are being thrown around and incentives are being discussed to encourage the corporations to commit to the cause.

Through 2026, the government would like the private sector to invest 340 trillion won ($259 billion) in semiconductors. The goal is to increase Korea's global chip market share to 10 percent from the current 3 percent and increase material, parts and equipment independence to 50 percent from 30 percent.

Korea wants to become an essential production base within the global supply network for semiconductors.

Details were in a road map published by the Ministry of Trade, Industry and Energy on Thursday.

The strategy is more carrot than stick. Infrastructure support will be offered, red tape cut and tax benefits granted.

Infrastructure development will be centered on the SK hynix Yongin Cluster and the Samsung Electronics Pyeongtaek campus. The government also plans to raise the floor-area ratio from 350 percent to 490 percent only for the two sites. This will allow for more factory space.

SK hynix plans to construct the Yongin Cluster. It will be investing about 130 trillion won in the project, which is to be completed in 2027. Samsung Electronics is expanding its Pyeontaek semiconductor campus with an investment of 120 trillion won. The expansion is expected to be completed in 2024.

Tax credits for large companies investing in chips are to be upped by 2 percentage points from the current 6-to-10-percent range. The credit will also be available for a wider range of activities, including research and development, chip design and verification equipment.

Red tape related to safety will be eased in some cases, such as regulations dealing with the high-pressure gas necessary for extreme ultraviolet (EUV) lithography.

To support the development of next-generation semiconductors, the government will speed up the feasibility studies on government-funded projects between 2024 and 2030.

This includes 450 billion won of projects related to high-energy efficiency and environment-friendly semiconductor, 500 billion won of auto semiconductor projects and 1.25 trillion won of AI semiconductor developments.

The government plans to allocate 1.5 trillion won to fund research and development, product testing and overseas expansion. Employees recruited from overseas will get a 50 percent break on their taxes for 10 years, up from the current five years.

In support of the semiconductor material, parts and equipment developers, the government will create clusters in Pyeongtaek, the first phase to be completed next year and the second in 2024.

The announcement was made during Minister Lee Chang-yong's visit to Dongjin Semichem, semiconductor material supplier, on Thursday.

According to the government, global semiconductor sales totaled $600 billion in 2021. Last year it grew 24.2 percent, faster than the 10.3 percent in 2020.

Korea has been No.2 in terms of the overall semiconductor market share for nine straight years and is No.1 in memory chips. It has 59 percent of the memory chip market, 71 percent of the DRAM market and 47 percent of the NAND market.

The country is facing major competition. Idaho-based Micron last year started delivering the world's first 14 nanometer DRAM and 176-layer NAND.

Korea is also struggling to catch up in system semiconductors and in fabless manufacturing. It has a 3-percent market share in global systems semiconductors, and LX Semicon is the only Korean company within the top 50 fabless companies.

Taiwan's TSMC has 52 percent of the foundry market and Samsung Electronics 16 percent.

Export restrictions of key materials from Japan since July 2019 continue to weigh on the market as Japan has 50 percent of the market for semiconductor-related materials.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]