'Onshoring' Emerges in Global Semiconductor Supply Chain Restructuring

Support Program for Korean Companies Seeking Entry into the US Market Emerges
US Provides Subsidies and Tax Support
Onshoring Rises but "Korean Market Lacks Appeal"

Photo by SK Hynix

[Asia Economy Reporter Kim Pyeonghwa] Along with the global semiconductor supply chain restructuring and intensified competition among countries, competitors such as the United States and Japan are actively promoting 'Onshoring'?the attraction of foreign companies' domestic production facilities and the expansion of domestic companies' home production facilities?by leveraging various supports. Although South Korea is also showing attempts to enhance competitiveness, such as the anticipated increase in the tax credit rate for semiconductor facility investments, experts advise that additional supplementary measures need to be prepared since the market attractiveness is insufficient to attract overseas investments.

According to the semiconductor industry on the 5th, the Korea Trade-Investment Promotion Agency (KOTRA) recently began recruiting a 'Semiconductor Investment Survey Team' targeting domestic semiconductor companies wishing to enter Texas, USA, in cooperation with the Korea Semiconductor Industry Association. Participating companies will visit Austin, Texas, in March for a four-day event to attend briefings related to local entry support and inspect nearby sites, helping them explore local entry strategies. The expected participating companies are Samsung Electronics' partners.

KOTRA emphasized in the recruitment announcement that "due to the introduction of semiconductor incentives such as the Chips and Science Act (CSA) locally, corporate entry is becoming active, especially around the Dallas area." They expect investment demand to arise in regions such as Dallas, Houston, and Taylor, centered on Austin, where Samsung Electronics' foundry (semiconductor contract manufacturing) plant is located, and explained that events will be held in cooperation with the Texas Economic Development Corporation (EDC) and the Austin Chamber of Commerce.

In fact, the United States is focusing on attracting local investments from not only domestic companies but also foreign companies by offering various support measures. They are actively pursuing 'Onshoring' beyond just 'Reshoring'?the return of production facilities previously relocated overseas. With the US-China hegemony competition becoming prominent in the semiconductor sector and semiconductors emerging as a core of national technological security, the US is reorganizing the semiconductor supply chain centered on its own country.

Since introducing the Semiconductor Support Act in August this year, which provides subsidies and a 25% tax credit to semiconductor companies building production facilities locally, the US has led domestic companies Intel and Micron to execute investments for semiconductor factory construction in Ohio and New York, respectively. Taiwan's TSMC also recently responded to US government support by increasing its investment from $12 billion to $40 billion to establish two foundry plants in Arizona.

Photo by Samsung Electronics

Japan is also actively seeking support measures for its domestic semiconductor industry while attracting foreign companies. The Japanese government supported about 40% (476 billion yen) of the construction cost (1.2 trillion yen) for TSMC's foundry plant being built in Kumamoto Prefecture, Kyushu, last year. Europe also announced plans in November last year to promote a semiconductor support law (European Chips Act) worth 43 billion euros, aiming to increase semiconductor production within Europe and attract investments from global semiconductor companies.

While global-scale onshoring is prominent, there is an assessment that it is difficult to enhance domestic semiconductor capabilities through onshoring in South Korea. In particular, the domestic market is considered unattractive for attracting large-scale overseas investments. A semiconductor industry insider explained, "The reason there are many semiconductor factories in the US or China is that demand-centered markets with major clients have been formed," adding, "For factories to come to Korea, conditions must be favorable, but unless the government provides strong incentives, companies will not come voluntarily."

The government's recent announcement to revise the Restriction of Special Taxation Act, which gained attention through the K-Chips Act, to raise the semiconductor investment tax credit rate to 15% for large and medium-sized enterprises and 25% for small and medium-sized enterprises is a positive factor. There is also an additional 10% tax credit rate for increased investments applicable temporarily this year. However, the support is limited to domestic corporations as defined by law (corporations with headquarters, main offices, or substantial business management locations in Korea).

Experts advised that since competition among major countries is intensifying with various subsidies, additional supplementary measures should be considered. Park Jae-geun, president of the Korea Semiconductor Display Technology Society, said, "If foreign companies invest, benefits should be provided like in the US and Japan, but we cannot say that the environment is well established yet," adding, "The environment is heavily regulated, and the budget for support such as the Foreign Investment Promotion Act is insufficient, so improvements are needed."

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