$450 billion over 10 years! South Korea will create the world's largest semiconductor manufacturing base

The South Korean government yesterday held the "K-Semiconductor Strategy Report Conference" at Samsung's Pyeongtaek plant, and formally announced a 510 trillion won (about 450 billion US dollars, 2.9 trillion yuan) "K Semiconductor Strategy" over the next 10 years.

South Korean President Moon Jae-in said at the meeting that the goal is to build South Korea into the world's largest semiconductor manufacturing base and lead the global semiconductor supply chain.

According to reports, "K semiconductor strategy" is South Korea's Samsung Electronics, SK Hynix and other 153 enterprises in the next 10 years of investment, the South Korean government behind the funding, policy and other aspects of the support of a semiconductor national strategy.

The South Korean government will set up a joint enterprise, semiconductor production, raw materials, parts, equipment and cutting-edge equipment, design and other efficient industrial clusters, the goal of building the world's largest semiconductor manufacturing base before 2030.

$450 billion over 10 years! South Korea will create the world's largest semiconductor manufacturing base

Samsung Electronics has said it will continue to increase capital spending, which it expects to increase by 30% to $151 billion by 2030. SK Hynix also plans to spend $97 billion to expand existing facilities and $106 billion to build four new plants in the city of Yongi.

The South Korean government announced that it will also provide related enterprises with tax relief, expansion of financial and infrastructure support, among which the deductible tax rate of company R&D investment will be raised to 40-50% at most, and the tax deduction rate of equipment investment will be raised to 10-20% at most.

In addition, the government also plans to set up a special fund of 1 trillion won for semiconductor equipment investment to support enterprises' equipment investment at low interest rates.

The government will also relax regulations on handling chemicals to support private investment. There will also be a "semiconductor special law" and an interagency protocol regime to prevent the outflow of technology.

In addition, to cultivate talents for the semiconductor industry, the number of personnel in semiconductor-related universities will be expanded, aiming to cultivate about 36,000 talents in the next 10 years. To prevent a brain drain of excellence, the government will award "celebrity" status to those with excellent semiconductor manufacturing skills.

While South Korea is a global leader in storage, it is relatively weak in logic chips.

According to a report released on the 11 May by the Federation of Korean Industries (FKI), the country's chipmakers had sales of more than Won1tn last year, only a third of Taiwan's and about half of mainland China's.

According to FKI's survey of 143 semiconductor companies, including equipment makers, in South Korea, Taiwan, China and the US, 32 US companies had revenues of more than Won1tn last year, followed by Taiwan (21), China (17) and South Korea (seven).

The survey also showed gross profit growth of 12.9% in 2020 from the previous year, but far below 44.9% in China and 36.8% in Taiwan, and just ahead of 4.5% in the US.

The results suggest that Korean chipmakers have a weak business mix and lag behind in the non-memory sector, which accounts for the largest share of the overall semiconductor market. At the same time, South Korea's semiconductor industry relies on foreign companies, especially Japanese companies, for many materials, components and equipment.

In addition, South Korean manufacturers have lagged behind TSMC in terms of market share and production capacity in contract manufacturing of high-performance semiconductors, which they fear will hurt their economy.

The semiconductor strategy proposed by the South Korean government aims to solve these problems while building South Korea into the world's largest semiconductor manufacturing base for semiconductor raw materials, components, devices and other enterprises.

South Korea's semiconductor exports totaled $99.2 billion in 2020, the data showed.