Seen above is a plot of land that will house the nation's mega-sized chip cluster in Yongin, Gyeonggi Province, in this file photo taken Jan. 15. Newsis
The Korean government is set to provide a policy financing package worth 14 trillion won ($10 billion) to chip material, component and equipment manufacturers, as well as fabless companies, in an effort to support struggling industry players facing heightened trade risks under the upcoming presidency of U.S. President-elect Donald Trump.
According to the Ministry of Trade, Industry and Energy, the government is also considering taking on a financial burden of 1.8 trillion won to cover the cost of undergrounding transmission lines for a semiconductor cluster to be established in Yongin, Gyeonggi Province.
“The government will supply the massive policy financing in 2025 to every corner of the industry, so Korea's chip industry can overcome escalating market uncertainties triggered by the inauguration of the new government in the U.S. and China's growing rivalry,” the ministry said in a statement, Wednesday.
The decision came amid increasing concerns that Samsung Electronics and SK hynix may no longer be eligible for subsidies from the United States, as Trump intensifies his rhetoric surrounding the CHIPS and Science Act enacted by the Biden administration.
Under the act, Samsung Electronics will receive $6.4 billion in subsidies for its plant in Texas, and SK hynix is also scheduled to win $450 million in incentives for its chip packaging facility investment in Indiana.
Responding to the external risk factor, the Korean government is in talks with the National Assembly to minimize corporate burden for the infrastructure project of the chip cluster. The power transmission infrastructure project is worth 3 trillion won, but the government is moving to cover more than half of the expenses to ensure its smooth progress.
Samsung Electronics' semiconductor plant in Austin, Texas / Courtesy of Samsung Electronics
The Korea Development Bank is also set to launch a low-interest loan product worth 4.25 trillion won for chip industry players. The state-run lender has plans to expand the chip ecosystem fund to around 420 billion won next year.
The government and the National Assembly are on track to join forces to offer more tax incentives for companies investing in chip equipment and conducting research in the industry. Both ruling and opposition parties have recently reached a consensus to increase the tax deduction rate for semiconductor equipment investment by large companies to 20 percent, a 5 percentage point increase. The rate for small and medium-sized chip companies will also rise to 30 percent.
The authority pledged to increase tax benefits to any chip players expanding R&D investment.
The government also presented its vision to invest more in artificial intelligence (AI). Under the plan, it will team up with the private sector to build what it calls the national AI computing center worth 4 trillion won by 2030.
The move reflects the intensifying rivalry in the global AI industry, with the U.S. and China especially pushing aggressively to expand their AI infrastructure in a bid to gain the upper hand.
Catching up with the AI-driven global tech paradigm shift, the government will invest 400 billion won in expanding the nation's AI computing infrastructure next year.