South Korea Announces $19 Billion Support Package for Semiconductor Industry

South Korea announced a USD 19 billion support package for semiconductor businesses. President Yoon Suk-yeol unveiled a record-breaking support package to solidify the country's position in the fiercely competitive global semiconductor market. This move comes amidst intense competition, often described as a "chip war," with countries like China and the United States pouring billions into developing domestic semiconductor fabrication plants.

South Korean President Yoon Suk-yeol: Image source: Reuters

The government will allocate around USD 12 billion for large-scale investments by major semiconductor companies like SK Hynix and Samsung. A significant portion of this fund will be channeled through the state-run Korea Development Bank to provide financial backing for projects undertaken by industry giants like Samsung Electronics and SK Hynix. This will likely fuel advancements in areas like memory chip production, where South Korea already holds a dominant market share.

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The support package also allocates USD 730 million to establish a dedicated fund for equipment makers and fabless companies. Fabless companies design chips but rely on external foundries like TSMC for manufacturing. This segment is crucial for innovation and diversification within the chip industry. By nurturing these players, South Korea aims to expand its capabilities beyond memory chips and capture a larger slice of the market for non-memory chips, such as mobile processors, where it currently holds a smaller share (around 2%).

President Yoon emphasized the urgency of this investment, citing the "all-out warfare" currently playing out in the global chip market. Countries worldwide are scrambling to secure domestic chip production capabilities due to their critical role in powering modern technology, from smartphones to artificial intelligence. Shortages during the pandemic highlighted the vulnerability of relying on concentrated production centers, and governments are keen to ensure greater self-sufficiency.

This substantial investment by South Korea reflects its ambition to maintain its leadership in memory chips and become a major player in the broader chip landscape. The initiative's success will depend on effectively distributing funds, attracting and retaining talent, and fostering a collaborative environment between major players and smaller, innovative companies.

Key Projects 

The South Korean government recently unveiled plans to establish a ‘semiconductor mega cluster’ in Yongin, south of Seoul. This project, involving a total investment of USD 470 billion, is a collaboration with major chip companies like Samsung Electronics and SK Hynix. The envisioned cluster will span an area of 21 million square meters and have a monthly production capacity of 7.7 million wafers by 2030.

For fabulous industry, the government plans to establish exclusive zones for the fabless semiconductor industry in Pangyo, along with foundry and memory chip production facilities in Hwaseong, Yongin, Icheon, and Pyeongtaek. An industrial zone for material, part, and equipment businesses will also be built in Anseong, with research and development facilities in Giheung and Suwon.

Read: South Korea Prepares Support Package Worth Over $7 billion for Semiconductor Industry

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