'Semiconductor Superpower'... Big Dreams, 0.1% Budget

Next Year's Semiconductor Industry Development Budget Totaling 1.0137 Trillion Won
Excluding Power and Water Infrastructure Support Plans... Limitations in Workforce Training
Tax Reform Plan Balanced... Support Still Insufficient Compared to US and Japan

[Asia Economy Reporter Han Ye-ju] The budget for fostering the semiconductor industry next year is only 1 trillion won, which is pointed out as grossly insufficient compared to global semiconductor competitor countries. Excluding the 450 billion won budget allocated for talent development, the actual total budget amounts to less than 0.1%.

While the industry cannot overlook the fact that the national fiscal management policy has shifted to sound finance, voices express regret over the scale, considering that the new government has set the goal of "achieving semiconductor superpower status."

According to the '2023 Budget Plan' announced by the Ministry of Economy and Finance on the 1st, the budget allocated to strengthen semiconductor competitiveness next year is 1.0137 trillion won. By category, 449.8 billion won is allocated for workforce development, and 563.9 billion won for technology development (390.8 billion won), infrastructure (147.1 billion won), and commercialization (26 billion won). This budget plan will be finalized after parliamentary review at the end of the year.

The Yoon Seok-yeol administration is prioritizing the semiconductor industry as the top industrial policy task, having prepared a 'Semiconductor Superpower Achievement Strategy' last month. However, experts still criticize the government for its grossly insufficient understanding of the semiconductor industry.

In fact, this budget plan excludes support for building power and water infrastructure for semiconductor complexes, which had raised industry expectations. Previously, the Ministry of Trade, Industry and Energy mentioned that it would consider national funding support for essential infrastructure construction costs in the Pyeongtaek and Yongin semiconductor complexes, where large-scale new and expansion projects are underway. Compared to major overseas countries, Korea’s companies have had to directly build infrastructure such as water and power, causing unfavorable public opinion in surrounding areas. Therefore, there was considerable expectation that government support through national funding for infrastructure related to the semiconductor industry would accelerate competitiveness enhancement. However, it is reported that during internal review at the Ministry of Economy and Finance, concerns were raised about the burden of national funding support for infrastructure construction amid an overall expenditure restructuring policy.

Limitations of the government’s proposed talent development are also mentioned. An industry official said, "Semiconductor workforce development is not a problem solved by simply injecting funds," adding, "Teachers capable of nurturing talent and systematic educational programs are needed, but there has been no discussion on how to develop such talent, which is regrettable."

At least, the government’s tax reform plan extends the tax credit period for facility investments in national advanced strategic industries such as semiconductors to 2030, and expands the tax credit rate from 6% to 20% for large corporations, from 8% to 25% for mid-sized companies, and from the existing 10% to 30% for small and medium enterprises, balancing the tax support benefits with competitor countries. However, this amendment must pass through the National Assembly to be finalized.

There are also views that the support scale is insufficient compared to other countries fostering the semiconductor industry. According to the Korea Institute for Industrial Economics and Trade, the United States passed the 'CHIPS Act' last month, providing direct subsidies of $39 billion for semiconductor manufacturing facility construction over five years until 2027, and investing $11 billion in advanced semiconductor research and development (R&D). Additionally, funds supported by the Department of Defense, Department of State, and others amount to $2 billion. Last year, Japan passed a supplementary budget that provides direct subsidies for building advanced semiconductor production plants domestically. The fund for subsidy payments, managed by the New Energy and Industrial Technology Development Organization (NEDO), amounts to 774 billion yen (75 trillion won). China is a representative country that provides so-called "blanket subsidies" to its domestic semiconductor companies.

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