Gov't leaves out direct grants in its $19B support program for chip industry

Industry

Published: 23 May. 2024, 15:00 Updated: 23 May. 2024, 19:15

Gov't leaves out direct grants in its $19B support program for chip industry

Korean President Yoon Suk Yeol speaks during a meeting reviewing economic issues at a presidential office in Yongsan, central Seoul, on Thursday. [PRESIDENTIAL OFFICE]

The Korean government has unveiled a 26 trillion won ($19 billion) incentive package aimed at bolstering the country's semiconductor industry in the midst of a cutthroat race against the United States, Taiwan, China and Japan among others.

The package did not, however, include direct grants as was expected by the industry.

The comprehensive package, announced by the presidential office Thursday, includes 17 trillion won for a loan program through the state-run Korea Development Bank targeting large-scale facility investment and 1.1 trillion won in funds, up from the planned 300 billion won, to foster the country's semiconductor ecosystem, from chip designers to equipment and material companies.

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The package also allocates 2.5 trillion won for infrastructure construction at the envisioned semiconductor mega cluster in southern Gyeonggi. The land preparation process for the industrial complex, which includes securing a water supply and electricity, will be halved to 3.5 years.

"Time is equivalent to subsidy," said President Yoon Suk Yeol during a meeting held Thursday with heads of the finance, industry, transport, environment and science ministries, promising to support the speedy construction of the cluster.

"Korea's chip industry has conquered the memory chip segment for the past 30 years. The future success of the chip industry will depend on logic processors, which account for two-third of the entire chip market. We have to make a winning move in logic processors, which are expanding beyond CPU and GPU to AI chips," the president said.

The announcement came in the wake of calls for greater support, especially in the form of direct grants, for the local chip industry to maintain its leading edges as rival countries like the United States and Japan hand out billions of dollars to ramp up their production capabilities.

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"There was strong calls for support in infrastructure," said Choi Sang-mok, deputy prime minister and finance minister during a briefing Thursday, when asked about the exclusion of direct grants.

"Liquidity is an issue when making investments and we are supporting liquidity in the form of low-rate loans instead of subsidies. We are also expanding the coverage of tax incentives, which are already at a better rate than in comparable countries."

The United States has committed $39 billion worth of direct grants in its ambitious move to bring back advanced chip manufacturing facilities to U.S. soil in its rivalry with China. Japan, under an initiative to revive its chip industry, also set aside 4 trillion yen ($25.5 billion) to boost domestically made chips.

"Direct grants are for countries that have to start from scratch in building manufacturing facilities. Instead, we are offering a high rate for tax incentives and expanding its coverage to relieve the liquidity crunch," Choi said in a briefing.

"Taiwan also doesn't have direct grants."

Korea aims to account for 10 percent of the global logic processor market by 2030, from the current two percent.

Detailed plans to achieve that target will be drafted by August, according to Industry Minister Ahn Duk-geun at the briefing.

BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]