"US Allocates Astronomical Funding for Semiconductors... Need for Advanced Korean Semiconductor Technology"

Policy Implications Report on the US Semiconductor and Science Act

[Asia Economy Reporter Park Sun-mi] With the passage of the U.S. 'CHIPS and Science Act,' the global semiconductor industry's division of labor system is expected to undergo a structural transition around 2025, highlighting the urgent need to advance South Korea's semiconductor strategy and support policies, according to a recent study.

On the 4th, the Korea Institute for Industrial Economics and Trade (KIET) emphasized in its report titled "Policy Implications of the U.S. CHIPS and Science Act" that since the U.S. aims to win the technological hegemony competition against China, South Korea urgently needs to formulate a comprehensive national-level science and technology and advanced industry strategy in preparation for the full-scale new Cold War between the U.S. and China.

The CHIPS and Science Act centers on a federal budget investment of $200 billion (approximately 260 trillion KRW) for basic scientific research and development (R&D), workforce training, and infrastructure expansion across various fields including artificial intelligence, semiconductors, related advanced industries, energy (nuclear power, carbon neutrality), biotechnology, and aerospace. Separately, the U.S. has secured a budget of $52.7 billion (about 69 trillion KRW) under the CHIPS Act to enhance advanced semiconductor manufacturing capabilities, while also introducing a 25% tax credit for facility and equipment investments, including the Semiconductor Promotion Act. Companies receiving subsidies under the CHIPS Act and tax credits under the Semiconductor Promotion Act will be prohibited from expanding or establishing manufacturing capabilities through equipment imports or expansions in China and other designated countries for the next 10 years.

The report stated, "The enactment of the U.S. CHIPS and Science Act reflects the U.S. leadership's recognition of the intensifying competition with China not only in economic and military fields but also in values." It added, "The astronomical financial investment by the U.S. reaffirms that national competitiveness is determined by science, technology, and advanced industry capabilities." Furthermore, it urged, "Facing increasing external uncertainties and structural low growth in the domestic economy, South Korea also needs to formulate and implement a comprehensive national science, technology, and industrial strategy. Additionally, it is urgent to prepare an external industrial technology strategy to leverage the global industrial landscape upheaval caused by the unfolding new Cold War between the U.S. and China as an opportunity for strategic industry advancement."

Moreover, the report advised, "Although the South Korean government has announced a strategy to become a semiconductor superpower and is strengthening semiconductor strategies such as the Special Act on National Advanced Strategic Industries, it is urgent to quantitatively expand and qualitatively enhance support policies in line with major countries offering massive direct subsidies and unprecedented tax benefits." It emphasized, "Special policy efforts should be made to provide timely support and resolve investment difficulties (such as regulations and local government permits)."

KIET Senior Research Fellow Kyung Hee-kwon particularly stressed the utilization of external conditions. Currently, the U.S. and the European Union (EU) aim to curb China and reduce dependence on Asia, with easing advanced semiconductor dependence on Taiwan?facing security threats?emerging as a key issue. He noted that a strategy is needed to secure Western demand for strategic decoupling from Taiwan, and in the short term, strengthening the competitiveness of the domestic advanced back-end process ecosystem is crucial.

Research Fellow Kyung stated, "Even for system semiconductors, which typically have characteristics of a contract-based industry, overcoming high market entry barriers such as long-term contracts and strengthening global market presence require companies to expand networks with major global firms leading future demand industries, while the government needs to enhance strategic cooperation with the U.S., EU, and others." He also highlighted, "Continued and strengthened interest and policy efforts are necessary to maintain the super-gap in our core field, memory semiconductors."

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