In a bold move to bolster its position in the global semiconductor industry, South Korea announced an ambitious plan to enhance support for its chip sectorThis initiative, aimed at underlining the country's strategic importance in the semiconductor field, was highlighted in a recent statement by the Ministry of Finance on May 12.

Finance Minister Choi Sang-mok revealed that the South Korean government is preparing to invest over 10 trillion KRW (approximately 73 billion USD) to boost its vital semiconductor industryThis infusion of capital represents a significant commitment from the government to solidify the nation’s foothold in a competitive global market.

The financing strategy may involve offering policy loans and establishing a new fund, which would be backed by both state and private financial institutions

This cooperative effort aims to facilitate joint investments through a collaboration of government entities, private sector stakeholders, and the Korea Development Bank (KDB).

Furthermore, the ministry indicated plans to actively discuss with the National Assembly the extension of the national strategic technology investment tax credit, which is set to expire at the end of this yearThe discussions might also explore broadening the scope of tax credits available for research and investment in strategic technologies.

In recent years, South Korea has been strategizing the creation of a “semiconductor mega-cluster,” intended to develop a significant chip production hub south of Seoul by 2047. This envisioned cluster aims to be the largest of its kind in the world, focusing on cutting-edge products and technologies.

Specifically, the government is planning to establish a dedicated area for foundry industries in Banqiao, while also constructing production facilities for wafers and memory chips in locations like Hwaseong, Yongin, Icheon, and Pyeongtaek.

Additionally, South Korea is set to build materials, components, and equipment industrial parks in Anseong, alongside R&D facilities in Gyeonggi and Suwon

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The region currently hosts 21 manufacturing plants, with a goal of adding 16 more facilities by 2047, including three new research establishments.

Minister of Trade, Industry and Energy An Deuk-geun stated, “Completing the construction of the semiconductor super-cluster as soon as possible will secure a leading global competitive edge in the chip field and provide quality job opportunities for the younger generation.”

In detail, Samsung Electronics plans to invest a staggering 500 trillion KRW, with projects including the establishment of six new foundries in Yongin, located 33 kilometers south of Seoul, and the construction of three additional foundries in Pyeongtaek, situated 54 kilometers south of the capital.

SK Hynix is also joining the fray, committing to invest 122 trillion KRW in constructing four new foundries in Yongin

The governmental strategy is heavily centered on private investments, focusing on advanced products like 2-nanometer process chips and high-bandwidth memory.

According to the Ministry of Trade, Industry and Energy, this expansive project, costing an estimated 622 trillion KRW, is expected to generate 3.46 million jobsBy 2030, the government anticipates that South Korea's market share in the global non-memory chip sector will rise dramatically from the current 3% to a landmark 10%.

As the substantial industrial cluster develops, the government has pledged to increase the self-sufficiency rate of the supply chain for critical materials, components, and equipment from the current 30% to 50% by 2030 to support this burgeoning ecosystem.

President Yoon Suk-yeol has emphasized the influx of foreign investment opportunities in response to the semiconductor super-cluster initiative

In a global scenario where foreign direct investments in many countries have declined, South Korea reported a record-high inflow of foreign investments last year.

Furthermore, Yoon stated that a wafer foundry requires a 1.3-gigawatt nuclear power plant, underscoring the need for stable and high-quality energy supply to the chip industryHe argued that if the country abandons nuclear energy, it would hinder not only the semiconductor sector but also other high-tech industries, emphasizing the need for ongoing development in the nuclear industry to bolster public welfare.

Concerning the soon-to-expire semiconductor investment tax incentive, Yoon indicated that the government plans to extend the validity of the respective legislation, ensuring that investment tax incentives will continue in the future

This policy aims to further stimulate investments in the semiconductor field, bolstering related supply chains and enhancing overall corporate profits, while simultaneously creating employment and increasing national tax revenue.

Recent analytical reports suggest that as the United States implements significant measures through the Chips and Science Act to establish semiconductor manufacturing facilities, the global supply chain for chips is expected to reorganize around the U.Swithin the next decade.

It is projected that the U.Smarket share in sub-10nm digital chips will soar from 0% in 2022 to 28% by 2032, whereas South Korea’s market share is expected to plummet from 31% in 2022 to 9% in 2032. Despite a reduction in South Korea’s status in the cutting-edge logic chip market, the skyrocketing demand for AI chips is propelling the DRAM market, particularly high-bandwidth memory, with South Korea’s DRAM capacity climbing from 52% in 2022 to an anticipated 57% in 2032.

The report observed, “South Korea's early investments in semiconductor industry development have significantly contributed to the rise of Samsung and SK Hynix as global leaders, enabling them to command over half of the global NAND flash and DRAM markets.”

In recent months, South Korea's semiconductor sales have experienced a surge, leading to a rebound in overall exports

Data indicates that March exports increased by 3.1% year-on-year, reaching 56.56 billion USD, marking six consecutive months of growthSimultaneously, imports totaled 52.28 billion USD, reflecting a 12.3% year-on-year decreaseAs a result, March recorded a trade surplus of 4.28 billion USD, continuing a streak of ten months in surplus since June of the previous year.

Additionally, according to statistics from the Ministry of Science and ICT, South Korea's semiconductor exports are projected to soar by 62.9% year-on-year in February 2024, hitting 9.96 billion USDThis includes memory chip exports valued at 6.08 billion USD, representing a 108.1% year-on-year increase, alongside logic chip exports of 3.42 billion USD, marking a 27.2% rise.

Analysts point out that this showcases a growth in South Korea's overall industrial production beyond expectations, and given that semiconductors account for the largest share of South Korean exports, this positive data also signifies a favorable momentum in the economy.