[Weekly Review] President Moon: "Semiconductor Powerhouse by 2030"... 510 Trillion Won Invested in K-Semiconductors

Public-Private Joint Effort to Build a 'Semiconductor Powerhouse'
Government and KEPCO to Share Up to Half of Infrastructure Costs Including Transmission Lines
Impact of Social Distancing Easing... 650,000 Increase in Employed Persons in April

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] The government and the private sector have joined forces to establish a 'K-Semiconductor Belt' in South Korea by 2030. The plan is to create a semiconductor manufacturing infrastructure encompassing everything from manufacturing to materials, parts, and equipment (SoBuJang), advanced equipment, and fabless (design). To this end, companies such as Samsung Electronics and SK Hynix have committed to investing more than 510 trillion won over the next 10 years.

◆ Companies to invest 510 trillion won in K-Semiconductor... Up to 50% tax credit on national core technology R&D = As the semiconductor hegemony competition accelerates centered on the US and China, the Korean government has unveiled a bold comprehensive semiconductor support plan. This comes from a sense of crisis that the country's status as a semiconductor powerhouse could be at stake.

On the 13th, President Moon Jae-in announced the 'K-Semiconductor Strategy' at Samsung Electronics' Pyeongtaek campus. The government will support private investment with a package including expanded tax credits, financial support, and infrastructure. The tax credit rate for companies' semiconductor research and development (R&D) investment will be increased to a maximum of 40-50%, and for facility investment costs, up to 10-20%.

They plan to secure 10 years' worth of semiconductor water supply in key semiconductor complexes such as Yongin and Pyeongtaek in advance, as a large amount of water is required for semiconductor production. Additionally, the government and Korea Electric Power Corporation (KEPCO) will jointly bear up to half of the costs for building power infrastructure such as transmission lines related to core strategic technologies.

Regulations have also been significantly eased. Chemical substance handling facilities will adopt a fast-track system to reduce the permit period by half. Financial support will be expanded by establishing a special fund of more than 1 trillion won for semiconductor and other facility investments, lowering interest rates by 1 percentage point.

They plan to nurture 36,000 industrial workers over 10 years and expand the enrollment in semiconductor-related departments to produce 1,500 graduates.

◆ Number of employed increased by 652,000 in April... Largest increase in 6 years and 8 months = Last month, the number of employed people increased by 652,000, marking two consecutive months of growth. This is the largest increase in 6 years and 8 months since August 2014 (670,000).

According to the 'April Employment Trends' released by Statistics Korea on the 12th, the number of employed people last month was 27,214,000, an increase of 652,000 (2.5%) compared to the previous year. This was due to the easing of social distancing, expansion of domestic production and consumption, and favorable exports, leading to economic recovery.

By age group, employment increased by 469,000 for those aged 60 and over, 132,000 for those in their 20s, and 113,000 for those in their 50s. The number of unemployed was 1,147,000, down 25,000 from a year earlier, and the unemployment rate fell by 0.2% year-on-year to 4.0%.

Employment among youth (ages 15-29) increased by 179,000 compared to the previous year, continuing a positive trend. This was driven by growth in information and communication, accommodation and food services, and manufacturing industries. The employment rate also rose by 2.6 percentage points from a year earlier to 43.5%.

◆ KDI raises economic growth forecast from 3.1% to 3.8% = The Korea Development Institute (KDI), a government-funded research institute, forecasted South Korea's economic growth rate at 3.8% this year. This is an upward revision of 0.7 percentage points from the previous forecast of 3.1% announced at the end of last year, largely due to improvements in the export sector.

KDI announced this in its '2021 First Half Economic Outlook' on the 12th.

Economic growth this year is expected to be driven by exports. KDI projected an 8.6% increase in total export volume and a 2.5% growth rate in private consumption. Due to the continued spread of COVID-19 this year, private consumption recovery is somewhat limited, but next year, a high growth rate of 4.0% is expected, centered on service consumption.

Jung Kyu-chul, head of KDI's Economic Outlook Office, said, "The global economy is recovering faster than expected, so exports are expected to rebound strongly," adding, "If vaccines are sufficiently supplied, the growth rate could exceed 3.8%."

KDI expects that the path of South Korea's economic growth will be greatly influenced by the spread of COVID-19 and the speed of vaccine distribution. In particular, if herd immunity is achieved early, a strong rebound centered on face-to-face service industries is expected, making it possible to achieve the 4% growth target set by President Moon.

This content was produced with the assistance of AI translation services.