Gov't to open checkbook for chip infrastructure as Trump change looms

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Gov't to open checkbook for chip infrastructure as Trump change looms

Published: 27 Nov. 2024, 19:50

SHIN HA-NEE
[email protected]

Audio report: written by reporters, read by AI

Finance Minister Choi Sang-mok, right, inspects a research site of Rebellions, a chip designer, in Seongnam, Gyeonggi, on Wednesday. [JOINT PRESS CORPS]

The government will shoulder more than half of the 1.8 trillion won ($1.29 billion) needed to build semiconductor infrastructure and offer tax incentives to chip companies as part of a wider policy plan to bolster the industry’s competitive edge amid intensifying market competition.

The move, announced during the Ministerial Meeting on Strengthening Industrial Competitiveness held in Seongnam, Gyeonggi, on Wednesday, is aimed at addressing burgeoning uncertainties as Korean chipmakers face a change in U.S. policy under the incoming Donald Trump administration and harsher competition from cheaper Chinese products.

“If policy proposals including a universal tariff plan become realized by the incoming U.S. government, there is a possibility that the uncertainties surrounding the Korean economy will further grow,” said Finance Minister Choi Sang-mok during the meeting.

“The government will take on the role of a player from now on, rather than just a supporter, to work alongside companies,” said Choi, promising that the government "will provide full support, leveraging every resource available to go beyond just utilizing traditional policy tools.”

This was the first Ministerial Meeting on Strengthening Industrial Competitiveness in two years, as the government decided to expand the scope and responsibilities of the inter-ministry discussion body to brace for the potential impact of the second Trump term while also enhancing the long-term competitiveness of the domestic industrial structure.

Under the latest plan focusing on the semiconductor industry, the government said that it would cover “a significant portion” of the 1.8 trillion won budget for undergrounding power lines, which will be used to supply electricity to the planned massive semiconductor industrial complex in Yongin, Gyeonggi.

While the exact amount of state funds for the project is currently under review, it will likely be more than half the total, according to the Finance Ministry.

Moreover, the government plans to funnel 14 trillion won in loans and investments to companies supplying chip parts and equipment next year, including low-interest loans worth 4.5 trillion won. A regulatory revision is underway as well to allow research and development equipment expenditures for chip companies to qualify for higher tax incentives.

Finance Minister Choi Sang-mok, second from left in the back row, poses for a photo with government and corporate officials during a signing ceremony for public-private cooperation for the utility construction of the Yongin semiconductor cluster in Seongnam, Gyeonggi, on Wednesday. [NEWS1

Concerns have been growing for Korean chipmakers following Trump's victory, especially with the president-elect’s cabinet nominees hinting at overhauling the outgoing Joe Biden administration’s CHIPS Act policy that promised a substantial amount of incentives for investments made on U.S. soil.

Vivek Ramaswamy, who was appointed to lead the Department of Government Efficiency for the Trump administration alongside Tesla CEO Elon Musk, slammed the subsidy program on his X account, linking an interview in which Commerce Secretary Gina Raimondo said the Biden administration will continue to work to finalize the previously announced deals ahead of the upcoming inauguration.

"This is highly inappropriate: they’re accelerating spending ahead of the transition of power,” said Ramaswamy on Wednesday.

Signed into law by President Biden in 2022, the act authorizes about $280 billion for creating or expanding U.S.-based chip manufacturing facilities. Under the act, Samsung Electronics secured a subsidy of $6.4 billion for its $45 billion chip investment in Texas, and SK hynix was granted $450 million for its $3.9 billion chip-packaging facility in Indiana, but has yet to finalize the deal.

BY SHIN HA-NEE [[email protected]]