South Korea Sets Aside $19 Billion to Fuel Semiconductor Industry

The world’s leading and biggest memory chipmakers, Samsung Electronics and SK Hynix are based in South Korea

South Korea president Yoon Suk-yeol announced a support package of $19 Billion for the country’s crucial semiconductor industry. The President said that around 17 trillion won will be spent on a financial support programme for chips through the Korea Development Bank. This will help the large-scale investments by semiconductor companies in South Korea. 

Citing the necessity of staying competitive amid ‘all-out warfare’ in the global semiconductor market in areas like chip design and contract manufacturing. 

Out of the 26 trillion won of the support programme, it includes financial support for certain investments as well as incentives of 17 trillion won. The entire amount exceeds twice the 10 trillion won proposal made less than two weeks ago by Finance Minister Choi Sang-mok.

“As we all know, semiconductors are a field where all-out national warfare is underway. Win or lose, that depends on who can make cutting-edge semiconductors first,” Yoon said at a meeting with top government officials.

The world’s leading and biggest memory chipmakers, Samsung Electronics and SK Hynix are based in South Korea. Last year, they pledged to build the world’s largest chip center with the capital of $456 billion of private investment, seeking an edge in the global industry. The government aims at creating millions of job opportunities by building a “mega chip cluster” outside of Seoul which will be the largest by far. President Yoon said in the hope of boosting employment and attracting more talent to the chip making industry, they would extend tax benefits for chip investments. 

Korea is the world’s largest chip manufacturer in the world. It has traditionally allowed private businesses like Samsung and SK to lead investment efforts. However the government is now making an active effort and has plans to build a massive complex of chip manufacturers south of Seoul. 

Shares in Samsung gained as much as 1.4% reversing their earlier losses in Seoul after the announcement was made. Following Nvidia Corp.’s stunning earnings report, other semiconductor companies saw a surge in Asia. Following the announcement, SK Hynix’s stock increased by almost 3% and maintained its morning gains.

The semiconductor industry is dominated by the US giant Nvidia that designs their own chips but outsources manufacturing, meanwhile South Korea’s share of the global semiconductor sector stood at about 1%. A major gap exists between the local chip makers and the leading contract chip makers like Taiwan’s TSMC. South Korea president Yoon Suk-yeol said a separate 1 trillion won fund  would be kept aside only to support equipment makers and semiconductor companies. 

Industry minister Ahn Duk-geun said the government aimed to help boost South Korea’s global market share in non-memory chips, such as mobile processors, to 10% from the current 2%.

The agreement surpasses the intentions declared by the country’s finance minister, Choi Sang-mok, earlier this month, when he said the government wanted to finance chip research and investments totaling more than 10 trillion won.

Seoul is going to set up an aid package worth more than $7 billion to support the chip industry, announced earlier this month. This will be done as a part of their initiative to boost the semiconductor sector that remains critical to the world’s fourth-largest economy.

In the areas where the country’s tech giants are well established already, the government of Seoul makes a move to invest heavily in six key technologies including chips, displays and batteries. 

The semiconductors of South Korea are the leading exporters that hit $11.7 billion in March. According to trade ministry figures this records to be the highest level in almost two years, accounting for a fifth of South Korea’s total exports. 

Samsung unveiled a massive 450 trillion won ($330 billion) investment blueprint for five years in May 2022, aiming to make South Korea the engine of all key sectors from semiconductors to biologics.