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Samsung Electronics in tougher business environment than TSMC

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Samsung Electronics employees pose for a photo at the firm's manufacturing plant in Gyeonggi Province, Aug. 3. Korea Times file
Samsung Electronics employees pose for a photo at the firm's manufacturing plant in Gyeonggi Province, Aug. 3. Korea Times file

By Lee Kyung-min

Korea's Samsung Electronics, the top global memory chipmaker and the world's second-largest foundry business, falls behind top market player TSMC, a Taiwan-based global foundry business leader, hobbled by heavy corporate tax, higher labor costs and a shortage of workers, a private think tank said, Wednesday.

Samsung's efforts to fortify its overseas business to outperform its Taiwanese competitor, which accounts for over half of the global market share will be in vain unless backed by government policies, the Korea Economic Research Institute (KERI) said. They include lowering tax rates, granting greater tax incentives for facility investment and research and development (R&D) activities, as well as measures to train and educate highly skilled experts.

The institute under the Federation of Korean Industries (FKI), the country's largest business lobby, said the comparative analysis of the two semiconductor powerhouses showed that Korea is in a business condition far worse than that of its Taiwan-based peer.

The ceiling for corporate tax in Korea is 25 percent compared to Taiwan's 20 percent.

The institute said the global top chipmaker will still have a tax advantage of 3 percentage points, even after the Yoon Suk-yeol administration's move to lower the figure to 22 percent is factored in.

However, tax incentives for the Korean firm are expected to increase, lifted largely by the Ministry of Trade, Industry and Energy's new policy drive where the ceiling for tax credit will be raised to as high as 40 percent, up from 2 percent for corporate R&D activities and to 6 percent from 1 percent for facility investments.

The revision places Samsung on about an equal footing as TSMC for whom as high as 15 percent in tax credit was granted, coupled with 40 percent of packing costs provided through a state grant. Also shouldered by the Taiwanese government were training and education costs for fostering experts in semiconductor manufacturing.

TSMC's labor cost averaged 95 million won ($72,600), lower than Samsung's 144 million won.

Only about 1,400 people are trained for high-end chipmaking in Korea, whereas around 10,000 in Taiwan receive such education.

"The advancement of Korean firms amid fierce global hegemony will be determined by how fast and appropriate the government responds with policy measures," the report said.





Lee Kyung-min lkm@koreatimes.co.kr


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