Introduction
South Korea has unveiled an expansive 26 trillion won ($19 billion) support package aimed at bolstering its critical semiconductor industry.
The country’s presidential office announced this initiative on Thursday, driven by President Yoon Suk Yeol.
This strategic move aims to enhance South Korea’s competitiveness in the non-memory chip sector and secure its position in the global semiconductor market.
Breakdown of South Korea $19 Billion Package:
- Financial Support: A significant portion, estimated around $7 billion, will be directed towards financial aid programs. This could include:
- Loans with favorable interest rates for chip companies through the state-run Korea Development Bank.
- Direct subsidies for research and development projects.
- Tax breaks for companies investing in chip manufacturing facilities and equipment.
- Infrastructure Development: The package allocates funds to expand existing semiconductor parks and develop new ones. This could involve building:
- Advanced cleanroom facilities that meet stringent chip production requirements.
- Supportive infrastructure like reliable power grids and high-speed data networks.
- Research & Development (R&D): The government aims to boost domestic innovation by:
- Funding research into next-generation chip technologies.
- Establishing partnerships between universities and chipmakers to accelerate research and development efforts.
- Talent Cultivation: Recognizing the importance of skilled workforce, the plan might include:
- Scholarships and training programs for engineers specializing in chip design and manufacturing.
- Initiatives to attract foreign talent with expertise in the field.
This south Korea $19 Billion package aims to achieve several goals:
Maintain Leadership: South Korea is home to Samsung Electronics and SK Hynix, two of the world’s top memory chipmakers. The investment aims to solidify this leadership position.
Boost Innovation: By supporting R&D, South Korea hopes to develop cutting-edge chip technologies and stay ahead of the competition.
Economic Growth: The chip industry is a crucial driver of the South Korean economy. This investment is expected to create jobs, attract further investment, and contribute to overall economic prosperity.
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Comprehensive Financial Support for Semiconductor Investments
The package allocates approximately 17 trillion won through the state-run Korea Development Bank. This funding supports large-scale investments by semiconductor companies, ensuring they have the necessary capital to expand operations and drive innovation.
The financial boost will facilitate advancements in semiconductor technology, helping South Korean companies maintain a competitive edge.
Additionally, the package includes the creation of a 1 trillion won fund specifically for equipment manufacturers and fabless companies—those that design chips but outsource their manufacturing.
This targeted support is crucial for nurturing the development and growth of the fabless sector, which has lagged behind other areas of the semiconductor industry in South Korea.
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Boosting Competitiveness in Non-Memory Chips
President Yoon has instructed the industry ministry to develop innovative measures to strengthen South Korea’s position in the non-memory chip market.
Despite being home to leading memory chip makers like Samsung Electronics and SK Hynix, South Korea has been lagging in the fabless sector, holding about 1% of the global market share. This sector includes major players like the U.S.-based Nvidia.
The new measures aim to close this gap and enhance South Korea’s competitiveness in all areas of semiconductor production.
“South Korea is supplying 80 percent of the world’s memory semiconductors, and has said it is investing 300 trillion won in the Yongin cluster, but there has been a water supply issue with it,“
Kim Dae-jong, a professor of business administration at Sejong University in Seoul, told AFP.
Expansion Beyond Initial Budget
The new support package significantly exceeds the plans outlined earlier this month by Finance Minister Choi Sang-mok.
Initially, the government targeted over 10 trillion won in support for chip investments and research.
The expanded budget underscores the administration’s commitment to securing a dominant position in the global semiconductor landscape and reflects the urgent need to address the industry’s challenges.
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Strategic Infrastructure Development
A key component of South Korea’s strategy involves developing a mega chip cluster in Yongin, located south of Seoul.
This complex, touted as the world’s largest high-tech chipmaking hub, aims to attract both chip equipment manufacturers and fabless companies.
Establishing this cluster will significantly boost the domestic semiconductor ecosystem, providing state-of-the-art facilities and fostering collaboration among industry players.
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Government Initiatives to Foster Growth
In January, President Yoon pledged to marshal all possible resources to win the “war” over semiconductor supremacy.
This includes extending tax credits for investments in the domestic semiconductor industry. This move aims to boost employment and attract top talent to the sector.
The government also focuses on research and development (R&D) initiatives. These initiatives aim to drive innovation and technological advancements in semiconductor manufacturing.
“We have created a comprehensive support program for the semiconductor industry worth 26 trillion ($19 billion) Korean won, which encompasses financial, infrastructure, research and development, as well as support for small and medium-sized companies.”
South Korean President Yoon Suk-yeol
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Economic Impact and Future Outlook
The semiconductor industry is vital to South Korea’s economy, accounting for 18% of the country’s total exports in April.
The government’s robust support measures are anticipated to fortify South Korea’s position in the global market, bridging the gap with leading contract chipmakers like Taiwan’s TSMC.
The package aims to ensure long-term economic growth by fostering innovation, creating jobs, and enhancing the country’s technological capabilities.
By investing heavily in both infrastructure and innovative support mechanisms, South Korea aims to solidify its standing as a global leader in the semiconductor industry.
These efforts are expected to drive forward the country’s economic growth, technological advancements, and global market presence.