Small and medium-sized corporations in the semiconductor materials, parts, and equipment sector can receive up to 50% of their investment back as investment subsidies if they make new investments in their facilities or locations. The government has decided to invest 20 trillion won out of a 50 trillion won advanced strategic industry fund into the semiconductor industry to help semiconductor corporations secure investment resources. In addition, support for technology guarantees for small businesses in the semiconductor sector will also be expanded.
On the 15th, the government finalized the 'Financial Investment Enhancement Plan for Global Semiconductor Competitiveness' during an economic ministers' meeting chaired by Deputy Prime Minister and Minister of Economy and Finance Choi Sang-mok.
Our country, recognized as a semiconductor powerhouse, maintains a global competitive edge in the memory sector, but is assessed to have a weak foundation in the system semiconductor sector. Amidst this, voices from the industry demanding increased government support are growing as uncertainties rise following the inauguration of the new Donald Trump administration in the United States. Concerns are also being raised that the 'Special Semiconductor Act' to support semiconductor corporations may be stuck in long-term deliberation in the National Assembly, risking the loss of the golden time needed to seize the semiconductor market.
In response, the government has decided to pursue four major support package measures: expanding infrastructure construction and investment support for the semiconductor industry, developing next-generation semiconductors, and securing excellent talent.
◇ Establishment of exclusive investment subsidies for semiconductor SMEs… 3 trillion won increase in low-interest loan resources
The government has established a new investment subsidy in its announced semiconductor support plan. The industry has been actively demanding financial investments from the government, citing semiconductor subsidies promoted by major countries such as the United States, China, and Japan. However, the government has displayed a passive stance regarding subsidy policies, citing poor financial conditions and the possibility of violating WTO subsidy agreements.
However, in order not to fall behind in the global semiconductor industry competition, it was judged necessary to actively support and establish investment subsidies. However, large corporations with relatively strong capital, such as Samsung Electronics and SK hynix, are excluded, and the subsidy support target is limited to small and medium-sized corporations. The focus is also restricted to advanced materials, parts, and equipment.
Regarding this, Kang Yoon-jin, Economic Budget Officer at the Ministry of Economy and Finance, said, 'Listening to the industry, large corporations hoped for rapid infrastructure development. In addition, we are providing benefits(favor) to large corporations through tax credits for investment.' He explained that the subsidy system targeting small and medium-sized corporations was planned, focusing on relatively weak materials, parts, and equipment, as well as fabless (semiconductor design specialist).
The newly established investment subsidy will vary depending on location and corporation size. If a small corporation invests in a non-capital area, it will receive 50% of the investment cost back, while those investing in the capital area will get 40% in subsidies. For medium-sized corporations, the subsidy for non-capital investments is 40%, and for capital investments, it is 30%. The government plans to include all investments made after January 1 of this year as targets for subsidy support. However, the subsidy support limit is capped at a maximum of 15 billion won per case and a maximum of 20 billion won per corporation.
The government has also decided to expand the existing low-interest loan resources for semiconductors from 17 trillion won to an additional 3 trillion won, supporting a total of 20 trillion won in financing. It is also considering a new investment of 200 billion won so that the Korea Development Bank can actively carry out policy financing through grants.
The limit for technical guarantees in the semiconductor sector will also double from the current 10 billion won to 20 billion won, and the technical guarantee rate for the general semiconductor sector (currently 85%) will be raised to next-generation semiconductor levels (95%).
For semiconductor investments made by corporations after January 1 of this year, support measures will continue to raise the tax credit rate compared to national strategic technology by 5%.
If a small corporation that made a new investment of 10 billion won in a non-capital area generated an operating profit of 10 billion won, it would receive 6.5 billion won over three years. Initially, the corporation would get back 5 billion won as an investment subsidy, which is 50% of the investment amount of 10 billion won. Apart from the subsidy, the remaining investment amount of 5 billion won would allow for a tax credit of 15% or 1.5 billion won. However, under the minimum tax rate regulation of 7%, in 2026, 1.3 billion won will be deducted as a tax credit for the fiscal year ending in 2025, and in the following year, 200 million won of the remaining credit will be carried over.
◇ 1.3 trillion won in government support for underground power transmission projects in Yongin and Pyeongtaek
The government has decided to cover 70% of the underground construction costs of the power transmission infrastructure in the Yongin and Pyeongtaek semiconductor clusters. The construction of the Yongin and Pyeongtaek power transmission infrastructure is estimated to require a total of 40 trillion won in funding. The principle is that the costs will be borne by users, which has led to criticism that it increases the burden on corporations wanting to settle in the Yongin and Pyeongtaek semiconductor cluster.
In particular, as Yongin and Pyeongtaek are densely populated areas, undergrounding power lines is necessary for prompt infrastructure development. The cost of undergrounding is 60% of the low-voltage power infrastructure construction cost, amounting to 24 trillion won. So far, Korea Electric Power Corporation has invested 4 trillion won, and the corporations intending to move in have contributed 2 trillion won, but about 18 trillion won more is needed to complete the undergrounding work.
The government has decided to support 70% of the cost (12.6 billion won) that corporations must bear for the underground power line construction cost of 18 trillion won, in order to ensure that large-scale advanced strategic industry specialized zones (hereinafter referred to as 'Attachment zones') can be established in a timely manner. This amount will also be reflected in this year's supplementary budget, which the government has stated will include 6.26 billion won.
The limit for infrastructure support for attachment zones will also be doubled. Currently, the infrastructure support cost for each attachment zone is capped at 50 billion won. There are remarks that the support limit is insufficient compared to the size of the corporations. In the case of Yongin General Industrial Complex, it costs 39 trillion won just for the self-owned wastewater treatment facility, and in the case of Pyeongtaek General Industrial Complex, 2.2 trillion won is required for the installation of a self-owned transformer station, adding considerable burden on corporations.
Therefore, the government plans to raise the upper limit of national support for infrastructure such as electricity and water for large clusters with an investment scale exceeding 100 trillion won from the current 50 billion won to 100 billion won. Additionally, the support ratio for the construction costs of attachment zone infrastructure, which is currently 15-30%, will be increased to a maximum of 50%.
To expand infrastructure support for attachment zones, the government has decided to increase the 'Attachment zone infrastructure support construction project expense,' which has only 25.2 billion won allocated in this year's budget, by 117 billion won through the supplementary budget.
◇ Establishing 'mini fabs' to secure semiconductor design competitiveness
The government will also promote the expansion of AI semiconductor demonstration equipment to facilitate the development of next-generation semiconductors. Plans are in place to build public infrastructure for verifying design errors (approximately 7 billion won per unit) and for prototype demonstration equipment (approximately 1.2 billion won per unit) so that small-scale fabless companies can jointly utilize them.
Plans are also underway to establish a 'mini fab' similar to the actual mass production environment within the Yongin semiconductor cluster.
Support for 'star fabless' corporations possessing technological innovation capabilities in the next-generation semiconductor sector will also be expanded. The government selected 20 star fabless corporations last year and is currently supporting semiconductor design R&D for 15 of them. It plans to provide support for five star fabless corporations as well.
Programs for nurturing talent will also be expanded. In particular, the government is planning to establish and operate 'outbound' programs that allow domestic new researchers to go abroad for R&D training, as well as 'inbound' programs that allow advanced foreign experts to come to South Korea to learn specialized skills.
To effectively educate outstanding semiconductor talent in the regions, the government is also planning to construct semiconductor academies currently concentrated in the capital area in local areas.