A Step Forward for the Semiconductor Special Act... An 'Incomplete Support Measure' Task

President Moon and Political Circle's Promise: Countdown to National Assembly Plenary Session Passage After 9 Months
Radical Tax Support, University Enrollment Expansion, and Flexible Work Hours Fail to Overcome 'Regulatory Barriers'

On the afternoon of the 10th, Park Kwang-on, the chairman, struck the gavel at the plenary meeting of the Legislation and Judiciary Committee held at the National Assembly. On this day, the committee passed the so-called "Special Measures Act on Strengthening and Protecting the Competitiveness of National Advanced Strategic Industries."
[Photo by Yonhap News]

[Asia Economy Reporter Lee Hye-young] A special bill to strengthen support for advanced industries, including semiconductors, has finally passed the National Assembly. It comes nine months after President Moon Jae-in pledged full support and the political circles promised to prepare the bill.

The industry expressed regret that some key support measures, such as tax credits and workforce development, were scaled back, but also showed expectations that the special law will serve as a catalyst for various government and related agencies' support to follow.

According to the industry and political circles on the 11th, the National Assembly held a plenary session in the afternoon and submitted the "Special Measures Act on Strengthening and Protecting the Competitiveness of National Advanced Strategic Industries," which passed the Legislation and Judiciary Committee the day before. The special law aims to establish a National Core Strategic Industry Committee under the Prime Minister's Office to activate investment and support in the advanced industry sector. Since it will take another six months from the bill's passage to actual implementation, full application is expected to begin in the second half of this year.

The industry welcomes the enactment of the special law but insists that additional measures are urgently needed compared to support policies in major countries such as the United States, China, and Japan. Key provisions that had raised expectations?such as tax support, workforce development, and flexible application of the 52-hour workweek?were included in the special law without overcoming various regulatory barriers, indicating that continuous discussions must follow.

In particular, major companies leading the global memory semiconductor market, such as Samsung Electronics and SK Hynix, receive tax benefits of only up to 10% even when investing in domestic facilities. This is a significant gap compared to the U.S., which is promoting the Innovation and Competition Act (USICA) that supports $52 billion for strategic industries including semiconductors, and has declared the Semiconductor Investment Promotion Act that refunds 25% of investment costs for domestic semiconductor facility investments. It also differs from the European Union (EU), which plans to support up to 40% of semiconductor investment costs, and China, which promises up to 10 years of corporate tax exemption with unprecedented benefits.

Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki is holding a meeting with students regarding semiconductor talent development on the afternoon of November 18 last year at the Engineering Building of Yonsei University in Seodaemun-gu, Seoul.
[Image source=Yonhap News]

The provisions related to workforce development, which the semiconductor industry has emphasized for years, did not lead to comprehensive support measures. In April last year, the industry issued a statement appealing to increase university quotas for related departments in the metropolitan area, but only the designation of specialized universities and contract departments, and the operation of education centers were included in the special law.

The urgent need for 300 to 700 specialized personnel to graduate annually from metropolitan universities to maintain global technological dominance was ultimately rejected on the grounds that it conflicted with the purpose of national balanced development. According to The Wall Street Journal (WSJ), the global semiconductor industry is engaged in a "talent war," with 70,000 to 90,000 additional semiconductor workers needing to be hired in the U.S. alone by 2025. Global semiconductor companies such as TSMC and Intel are actively securing talent, increasing the risk of domestic talent outflow and shortages becoming entrenched.

The request to flexibly apply the 52-hour workweek to allow concentrated work in advanced technology fields was also not included in this special law amid criticism that it contradicts the Moon Jae-in administration's labor policies.

An Gi-hyun, Executive Director of the Korea Semiconductor Industry Association, said, "It is fortunate that the special law was passed early this year. Although it did not fully incorporate corporate demands such as workforce development, deregulation, and tax benefits at once, concerns such as the fast-track regulatory improvements and preliminary feasibility studies were adjusted and reflected. Therefore, even after the law is implemented, the public and private sectors can continuously collaborate to further develop it."

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