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South Korea Announces Unprecedented $19 Billion Support Package for Chip Industry

President Yoon Suk-yeol has announced a landmark $19 billion support plan for South Korea’s vital semiconductor industry.

South Korea, home to leading memory chip manufacturers Samsung Electronics and SK hynix, pledged last year to construct the world’s largest chip center with $456 billion in private investment to gain a competitive edge globally.

“We have developed a comprehensive support program for the semiconductor industry, valued at 26 trillion Korean won [$19.1 billion], which includes financial aid, infrastructure, research and development, and support for small and medium-sized enterprises,” Yoon said, according to a statement from his office.

The package includes a previously announced $7 billion investment from earlier this month.

Yoon also announced that Seoul would extend tax benefits for chip investments to boost employment and attract more talent to the industry.

Additionally, the country is building a “mega chip cluster” near Seoul, which the government claims will be the world’s largest semiconductor manufacturing complex and will create millions of jobs.

“As you all know, semiconductors are a field of national all-out war,” Yoon said. “Winning or losing hinges on who can first produce state-of-the-art semiconductors with high information processing capabilities. The state must support the semiconductor industry to ensure it does not fall behind competitors,” he added.

As part of the new package, Yoon announced a “new semiconductor financial support program worth 17 trillion won” ($12.5 billion) to be managed by the Korea Development Bank, enabling companies to make essential new investments.

“As companies invest substantial amounts in facilities such as new factories and line expansions, liquidity issues arise,” he explained.

“I believe these challenges will be largely addressed through the Korea Development Bank’s support program,” President Yoon added.

The plan also includes the creation of a “semiconductor ecosystem fund” worth 1 trillion won ($734 million) to support semiconductor companies and related small and medium enterprises.

“Our fabless market share is still around 1 percent, and our foundry sector, which manufactures system semiconductors, struggles to close the gap with industry leaders like TSMC,” Yoon said.

Earlier this month, Seoul announced an aid package exceeding $7 billion to support its chip industry, part of a broader initiative to strengthen the semiconductor sector, crucial to the world’s fourth-largest economy.

These efforts come as the government plans to invest heavily in six key technologies, including chips, displays, and batteries, areas where the country’s tech giants already have a strong presence.

Semiconductors, South Korea’s leading export, reached $11.7 billion in March, the highest level in nearly two years, accounting for a fifth of the country’s total exports, according to trade ministry data.

In May 2022, Samsung unveiled a massive 450 trillion won ($330 billion) five-year investment plan aimed at positioning the country as a leader in key sectors, from semiconductors to biologics.

Securing advanced chip supplies has become a crucial international issue, with the United States and China engaged in a fierce battle for market control.

“South Korea supplies 80 percent of the world’s memory semiconductors and has committed to investing 300 trillion won [$220 billion] in the Yongin cluster, though it faces a water supply issue,” said Kim Dae-jong, a business administration professor at Sejong University in Seoul.

“In addition to addressing such issues, today’s announcement appears to support innovative small and medium-sized enterprises, further strengthening their competitiveness against rivals like Taiwan.”

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