Gov't pledges $6.9B for AI chips ahead of U.S. subsidy announcement for Samsung

President Yoon Suk Yeol speaks about the government's investment plan on AI semiconductors in a meeting on Tuesday in Seoul. [NEWS1]

With the U.S. Commerce Department set to award over $6 billion in subsidies to Samsung Electronics as early as next week, President Yoon Suk Yeol pledged 9.4 trillion won ($6.9 billion) of investment in AI semiconductors by 2027 on Tuesday.

Still, the committed funding will be allocated primarily as subsidies for research projects on AI and AI semiconductors, according to an official from the Ministry of Science and ICT, which is different from state-funded grants for the building of chip production facilities.

Korea only provides a fixed tax deduction rate for chip facility investment and no separate financial subsidies, a factor that many industry insiders say is a weak point compared to the United States, Japan and the EU with multibillion-dollar subsidy packages.

The subject of the 9.4 trillion-won funding will be a set of new-generation chips designed to facilitate the development of generative AI, such as High Bandwidth Memory with processing capabilities, Neural Processing Units and neuromorphic chips. The neuromorphic computing technology aims to develop integrated circuits mimicking the human nervous system so that chips can perform more sophisticated tasks that require adaptation and reasoning with far less energy consumption.

The executives of the country's major chipmakers called for more aggressive government funding and support.

“To turn Korea into a semiconductor hub and help maintain price competitiveness, [Korea] urgently needs to adopt support measures such as incentives for investment,” said Lee Jung-bae, president of the memory chip business division at Samsung Electronics.

SK hynix CEO Kwak Noh-jung said that the support policies should also benefit foreign semiconductor players.

"To secure a dominant position in the global AI semiconductor market, [the government] should introduce aggressive subsidy programs to attract not only Korean firms but foreign companies investing in Korea,” the CEO said in the meeting.

President Yoon acknowledged that different countries — especially advanced economies like the United States — are ramping up efforts to bring in domestic semiconductor production.

“The United States is shelling out an astronomical amount of money to attract chipmakers, and the one for Samsung Electronics will soon be announced,” he said in the meeting with the presidents of Samsung, SK hynix and Naver in attendance.

“Japan also made a unified effort to support the construction of TSMC’s factory in Kumamoto, which helped the project take only two years,” he said.

An announcement by the U.S. government concerning subsidies for Samsung Electronics worth at least $6 billion may come as soon as next week, according to Reuters, following the publicizing of $11.6 billion in grants and cheap loans for TSMC and grants totaling $8.5 billion for Intel in exchange for U.S. investments.

The Suwon, Gyeonggi-based chipmaker declined to comment on the report.

Samsung will likely up the amount of its investment in the U.S. to $44 billion, centering around the massive facility project in Taylor, Texas, according to the report.

The first plant is scheduled to be completed by the end of this year and mass-produce advanced chips starting next year.

The Korea JoongAng Daily reported that the tech giant is adding a new building in Taylor on top of the existing factory under construction, citing documents from the city government.

With the intensifying chip production race in the U.S., the Korean government has promised to expedite the approval process required for the building of large-scale chip complexes by Samsung and SK hynix in Yongin.

The Ministry of Environment said that it will halve the duration of the environmental impact assessment to six months, while the Ministry of Land, Infrastructure and Transport will also cut red tape to enable the Samsung project to break ground in 2026.

Still, the Korean chipmakers have suspended the construction of some domestic semiconductor plants after promising to funnel tens of billions of dollars into operations in the United States in response to the Biden administration's substantial incentive package.

Samsung Electronics early this year suspended work on its P5 line at its Pyeongtaek, Gyeonggi campus, drawing speculation that it was overhauling facilities and equipment in a pivot to AI processors.

Construction of SK hynix's M15X chip plant in Cheongju, North Chungcheong, slated for 2025 operation, has also been indefinitely delayed. In 2022, the Korean chipmaker pledged 15 trillion won for the plant over the next five years.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]