'Government and Semiconductor Factory Built Together'... Advanced Industry Fund Expanded to 50 Trillion Won

Government 'Advanced Strategic Industry Fund' Announced at Economic Ministers' Meeting
Fund Size Expanded to 50 Trillion Won
Government May Invest Equity in Factory Establishment
Financial Support Packages for Defense Industry Orders
Immunity Clause Specified in Law... Active Fund Management Expected

The government plans to expand the size of the 'Advanced Strategic Industry Fund' to 50 trillion won and support advanced industries such as semiconductors, artificial intelligence (AI), secondary batteries, and defense industries. Considering the intensifying global trade war following the inauguration of the Donald Trump administration, the government decided to increase the fund size and review the support targets flexibly. The government intends to submit the amendment to the Korea Development Bank Act within this month and begin supporting domestic companies within the year.

On the 4th, the Financial Services Commission announced the 'Plan to Establish the Advanced Strategic Industry Fund' at the Government Complex Seoul, together with the Ministry of Economy and Finance and the Ministry of Trade, Industry and Energy.

Expansion of Fund Size by Combining Semiconductor Financial Support

The government expanded the fund size to a maximum of 50 trillion won over five years. To maximize policy efficiency, the existing semiconductor financial support program (17 trillion won) will be merged with the Advanced Strategic Industry Fund. This year, the semiconductor financial support program will be executed as planned by the Korea Development Bank, and the remaining two years’ worth (12.75 trillion won) will be integrated into the Advanced Strategic Industry Fund and operated under the same conditions.

The fund resources will primarily be raised through government-guaranteed bonds. Additionally, contributions from the Korea Development Bank’s own resources will be included. Currently, for ultra-low interest loans in the semiconductor sector, the lowest interest rate is supported at the level of treasury bonds, which is lower than government-guaranteed bonds, so a secondary compensation-type cost is required.

The support targets will be specialized in advanced industries such as semiconductors, secondary batteries, displays, bio, defense, vaccines, robotics, hydrogen, future cars, and AI. Industries possessing national strategic technologies under the Restriction of Special Taxation Act, such as AI, vaccines, hydrogen, and future mobility, will also be added. Furthermore, if an industry is deemed necessary for economic security in the future, additional industries will be designated through inter-ministerial consultations.

Diversification of Support Methods Including Factory Investment and Order Financing Packages

The diversification of support methods also draws attention. Besides low-interest loans, companies can raise funds through equity investment, subordinated reinforcement, loan guarantees, and other methods they prefer.

For example, in the case of equity investment, when establishing a semiconductor fab or maintenance, repair, and operations (MRO) or yard for defense, a special purpose company (SPC) can be established with the supported company to carry out the project, and the Advanced Strategic Industry Fund or a fund invested by the fund can invest a certain level of equity to provide support. In the defense industry, where global order competition is fierce at the trillion-won level, financial packages will be supported to purchasing countries through the Advanced Strategic Industry Fund.

Companies are reportedly showing great interest in the Advanced Strategic Industry Fund. Nam Kyung-mo, head of the Industrial Policy Division at the Ministry of Trade, Industry and Energy, said, "We are communicating with companies in real time during the fund consultation process," adding, "Considering advanced industry specialized complexes, low-interest loans for individual companies, and investment projects announced at the Ministry’s Industrial Investment Strategy Meeting in February, demand is very high."

Specified in the Immunity Privilege Act... Passage of Law Essential for Support Within the Year

The Advanced Strategic Industry Fund will be operated through a fund management committee composed of private members. To maximize the effectiveness of policy finance, an immunity clause will also be specified. It is planned to stipulate in the law that if funds are provided based on the fund management committee’s decisions without intentional or gross negligence, immunity will be granted. This is expected to encourage the Korea Development Bank to actively manage the fund.

The key issue is the amendment of the Korea Development Bank Act. To establish the fund, the Korea Development Bank must have the law amended and government guarantee consent approved. If the amendment and guarantee consent are processed by March, it is expected that supported companies will emerge within the year. There are concerns that if the law’s passage is delayed, the policy’s effectiveness will be significantly reduced.

Kang Ki-ryong, director of policy coordination at the Ministry of Economy and Finance, said, "We plan to submit the bill and guarantee consent immediately in March, and there should be no differences between the ruling and opposition parties," emphasizing, "We hope the bill and guarantee consent will be passed as soon as possible so that actual support can be provided within the year if possible."

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