South Korea to set up world's largest semiconductor supply chain

By New Straits Times - May 14, 2021 @ 11:49am

SOUTH Korea has announced it will set up the world's largest semiconductor supply chain by 2030 to make the country a global leader in both memory and system chips.

The government said it plans to achieve this with the help of the private sector that includes Samsung Electronics and SK hynix.

According to a Korea Times report, the government will provide huge tax incentives to companies constructing semiconductor facilities, after chip manufacturers vowed to invest more than 510 trillion won (US$450 billion) into the project.

The firms will receive tax credits of between 40 to 50 per cent for investments into research and development projects in new chip technologies and up to 20 per cent for spending on new factories.

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Under the plan, the government said it will create a so-called "K- Semiconductor Belt" in the western part of the country and the central region.

It will encompass every scope of the semiconductor business ― manufacturing, materials, components and equipment, and design.

When announcing the plan, president Moon Jae-in said countries around the world were fiercely competing to reorganise their own supply chains.

"The direction we need to go in is clear. We are trying to make this opportunity ours by making pre-emptive investments that will not be shaken by external shocks."

In response to the government's plan, Samsung said it will spend an additional 38 trillion won to become a leader in both the memory and system semiconductor sectors, bringing its total long term investment to 171 trillion won.

In 2019, the company had announced it would invest 133 trillion won in its chip business by 2030.

"The entire semiconductor industry is facing a watershed moment and now is the time to chart out a long-term strategy and investment plan," Samsung's Vice Chairman Kim Ki-nam said.

"In the memory business, where Samsung has maintained its undisputed leadership position, the company will continue to make pre-emptive investments to lead the industry," he said.

Samsung recently held a ceremony with Hyundai Motor and the Ministry of Trade, Industry and Energy pledging to jointly work on solving the automotive chip shortage issue, which has been undermining productivity in the global auto industry.

Though details have yet to be provided, the industry ministry said the agreement will be a cornerstone in strengthening cooperation.

SK hynix said it will also double its 8-inch foundry business capacity in order to support the development, mass production and global market expansion of domestic fabless companies.

The government's announcement to boost the semiconductor industry comes at a time when other countries are providing support measures, including tax benefits, to chip companies to cope with shortages and supply chain deterioration.

On April 12, United States president Joe Biden held a virtual meeting with 19 international firms including Samsung Electronics and stressed a need to invest in the US semiconductor industry to secure the country's supply chain.

A second meeting will be held a day before a summit later this month between Moon and Biden.

Some industry analysts have said there may be a push for more investments in the US from tech firms, including Samsung.