■ Launch of the first large-scale semiconductor policy program
Limited national support due to tax revenue slump
Creation of private matching funds for policy finance
Total support size likely to be in the mid-10 trillion won range
Forecast for Korea’s market share to decrease from 31% to 9% by 2032
“Additional direct support policies should be considered”,
Deputy Prime Minister and Minister of Strategy and Finance Cho Sung-mok (left) visited HSPS, a semiconductor company located in Hwaseong, Gyeonggi Province, on the 2nd anniversary of the government’s inauguration, and listened to an explanation of the production line from CEO Kim Yong-woon. Photo provided by the Ministry of Economy and Finance,
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, ‘[Seoul Economy]’,
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, ‘The government’s semiconductor support policy is aimed at achieving relatively high effectiveness through indirect and financial support while minimizing fiscal expenditure. Deputy Prime Minister and Minister of Strategy and Finance Cho Sung-mok mentioned that a significant portion of the targeted support of at least 10 trillion won is expected to be provided through loans and funds.’,
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, ‘According to the Ministry of Economy and Finance and the Ministry of Trade, Industry and Energy on the 12th, the scale of the semiconductor industry support program is expected to exceed the mid-10 trillion won range. Deputy Prime Minister Cho, at a meeting held on the 10th at HPSP, a semiconductor equipment company in Hwaseong, Gyeonggi Province, remarked, “It would be great if we could provide unlimited financial support, but that is difficult,” and said, “As there are limitations to national support, it would be beneficial to mix various methods such as tax support and policy finance to optimize the direction of the Korean semiconductor industry.” Due to concerns about a revenue shortfall, with corporate tax revenues decreasing by 5.5 trillion won in the first quarter, there is a possibility of a revenue shortfall this year as well, leading to the decision to utilize joint private investment funds rather than direct fiscal injection.’,
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, ‘In the financial sector, it is forecasted that a significant portion of the semiconductor support program will involve creating a bridge with industrial banks and government finances to attract private capital. This involves industrial banks making annual investments amounting to tens of billions of won over several years, and private financial institutions matching these funds. Deputy Prime Minister Cho also explained, “Funding requires approval for bond guarantees from the National Assembly each year, so the process is rigid,” and stated, “Funds that are jointly invested by the public and private sectors, such as regional revitalization investment funds, are more flexible and can provide practical assistance.”‘,
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, ‘To revitalize 89 basic local governments designated as areas facing population decline, the Regional Revitalization Investment Fund was established, with the government, regional decline response fund, and industrial bank each investing 100 billion won to create a mother fund, which would then be used by the private sector to form a total of 3 trillion won in funds for regional development. Among the semiconductor support policies announced last year, there is a similar public-private joint fund structure. The ‘Semiconductor Ecosystem Fund’ established last year to invest in the small and medium-sized enterprise (SME) and fabs fields saw total investments of 300 billion won from companies such as Samsung Electronics and SK hynix in conjunction with the government. The use of funds also serves as a means to avoid restrictions on the lending limits of enterprises like SK hynix when borrowing through the industrial bank. Government support is also focused on equipment investment and research and development (R&D) for small and medium-sized enterprises.’,
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, ‘The government aims to enhance Korea’s semiconductor industry competitiveness with a focus on SMEs. A government official stated, “Although their presence may be low-key, we have a significant number of SMEs with competitive technologies,” and added, “The government will support these companies so that they can play a role in the global semiconductor market value chain.”‘,
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, ‘The Ministry of Economy and Finance plans to eliminate administrative regulations that hinder business growth, such as permits, and proactively support social indirect investments in areas such as water, roads, and electricity. Deputy Prime Minister Cho promised to expedite the preliminary feasibility studies of existing semiconductor industry support policies, such as the 55.69 billion won advanced packaging technology development project and the 90.6 billion won advanced semiconductor production-linked mini-fab construction project.’,
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, ‘While experts welcome the government’s expanded support, they also point out the need to consider additional direct support, especially for large manufacturing companies. There are concerns that support through loans and funds may end up being merely superficial. Kwak No-jeong, Chairman of the Korea Semiconductor Industry Association, mentioned in a meeting with Deputy Prime Minister Cho, “Investing in semiconductor manufacturing facilities requires a large amount of capital, which is a burden,” and said, “This is why we keep emphasizing cost competitiveness, and that is why the U.S. and Japan are providing corporate subsidies.”‘,
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, ‘Of particular concern is the additional subsidies being provided by the U.S. Currently, the U.S. has pledged a 39 billion dollar (approximately 53.5 trillion won) semiconductor subsidy and 13.2 billion dollars in R&D support, with predictions that a second semiconductor subsidy program could be established after the inauguration of the new government following the November presidential election. Even with the current subsidies, Korea’s share of advanced semiconductor production is expected to decline rapidly. The U.S. semiconductor industry association predicted that Korea’s market share of advanced semiconductor production at 10nm and below, which was 31% in 2022, would drop to 9% by 2032 as facilities in the U.S. and Japan enter full operation. In contrast, the U.S. market share is expected to soar to 28%. A senior industry official stated, “The key point is after 2030 when the U.S. and Japan start mass-producing semiconductors,” and expressed concern, “If the U.S. provides a second semiconductor subsidy, all of the most advanced facilities built in Korea will move to the U.S.”‘,
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