South Korea Pumps B Into Semiconductor Industry To Stay Competitive
semiconductor

South Korea Pumps $19B Into Semiconductor Industry To Stay Competitive

South Korea has announced a 26 trillion won ($19 billion) support package for its semiconductor sector.

What Happened: The package, revealed by President Yoon Suk Yeol, includes a 17 trillion won ($12 billion) financial support program via the state-run Korea Development Bank to encourage large-scale investments by semiconductor firms, Reuters reported on Thursday.

Additionally, a 1 trillion won ($733 million) fund will be established to aid equipment manufacturers and fabless companies, which design but do not manufacture chips. Yoon also directed the industry ministry to develop innovative strategies to enhance South Korea’s competitiveness in the non-memory chip sector.

This updated support package surpasses earlier plans mentioned by Finance Minister Choi Sang-mok, who had indicated a target of over 10 trillion won ($7.3 billion) for chip investments and research.

In April, South Korea’s chip industry accounted for 18% of the nation’s total exports, though it has been trailing in some areas. The country’s fabless sector, including companies like Nvidia, holds about 1% of the market share, with a notable gap compared to leading contract chipmakers like Taiwan’s TSMC.

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South Korea, home to top memory chip makers Samsung Electronics and SK Hynix, is constructing a mega chip cluster in Yongin, south of Seoul, aimed at becoming the world’s largest high-tech chipmaking complex.

In January, Yoon pledged to allocate all possible resources to win the “war” over chips, including extending tax credits on investments in the domestic semiconductor industry to boost employment and attract talent.

Why It Matters: The semiconductor industry is crucial for South Korea’s economy, contributing significantly to its exports. In December 2023, Samsung Electronics and SK Hynix achieved record-breaking production and shipment growth, with chip production surging by 42% compared to the previous year. This marked the highest increase since early 2017, and shipments rose by 80%, the most significant gain since late 2002.

In April, President Yoon announced a $7 billion investment in artificial intelligence (AI) to maintain South Korea’s global dominance in semiconductor chips. This investment includes a 1.4 trillion won ($1.02 billion) fund to support AI semiconductor firms, highlighting the country’s strategy to keep pace with the United States, China, and Japan, who are also heavily investing in their semiconductor supply chains.

In March, chip exports reached a 21-month high, nearly a fifth of the country’s total exports.

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Image: Unsplash/ Daniel Bernard

This story was generated using Benzinga Neuro and edited by Pooja Rajkumari

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