South Korea To Raise Tax Breaks To Support Chip Industry


The US, China and Japan are investing billions into building their semiconductor chip industry supply chains.

South Korea plans to raise tax breaks to as high as 25%, for big semiconductor companies looking to make significant investments in capital expenditure.

After President Yoon Suk Yeol called for bigger incentives to fuel the critical chip industry, the South Korean government plans to provide a tax credit of 15% to big companies on investments in manufacturing facilities, up from the planned 8% under legislation passed last month, according to a finance ministry statement.

Smaller companies’ capex spending will get a tax break of 25%, up from 16%. The ministry announced that any additional investment in chipmaking in 2023 will get another 10% tax break. The broadened plan, as reported by Bloomberg will be proposed this month. It could reportedly reduce the tax burden on companies by more than $2.8 billion (3.6 trillion won).

Countries such as the US, China and Japan are investing billions into building their semiconductor chip supply chains after the pandemic-driven supply chain bottlenecks highlighted the countries’ interdependence for key electronic components.

South Korea is home to semiconductor chip behemoths such as Samsung Electronics Co. and SK Hynix Inc. Samsung plans to build a $17 billion semiconductor plant in Texas and has floated the possibility of spending almost $200 billion on a series of plants in Austin and Taylor.

With the ongoing tensions between China and the US and the increasing sanctions placed by the US on chip technology exports bound for China, South Korea has been forced to choose between its biggest trade partner – China, and its security ally – the US.

The South Korean President has formed a 13-member special committee to come up with a solution for Seoul to expand its position in the $550 billion global semiconductor industry.



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