South Korea plans to bolster its fiscal support for domestic chipmakers next year, shoring up an industry that might face unfavorable policies from the incoming administration of US president-elect Donald Trump and more intense challenges from Chinese rivals.
Financial support made up of loans, insurances and guarantees from state-affiliated organizations is set to amount to 14.3 trillion won (US$10.3 billion) next year in an elevation of continued policy stimulus, the South Korean Ministry of Economy and Finance said yesterday.
Separately, the government plans to cover “a significant share” of the 1.8 trillion won needed to bury power cables in chipmaking clusters south of Seoul, it said in a statement.
Photo: Bloomberg
South Korea had already launched a 26 trillion won aid package in July, part of which would be reflected in next year’s support amount.
Separately, the government would seek to increase the tax credit rate for semiconductor-related firms by 10 percentage points and build a national “artificial intelligence computing center” worth 4 trillion won by 2030, it said yesterday.
South Korea is stepping up its support for the crown jewel of its economy at a time when Trump vows to bolster US manufacturing and reduce reliance on foreign supply chains.
While the nation has continued to funnel fiscal support into chipmakers, Trump’s election has added urgency to safeguarding the growth of the industry.
In its statement the ministry said there is potential for economic uncertainties to grow after the new US administration is inaugurated, even though US-South Korean ties in defense and shipbuilding could still benefit.
South Korea’s biggest company, Samsung Electronics Co, in particular is building a semiconductor factory in Texas with subsidies promised under the CHIPS Act of the outgoing administration of US President Joe Biden. Trump’s camp repeatedly criticized that funding program during the election campaign.
China might also ratchet up its pursuit of South Korea in supply chains, raising the need for Seoul to help shore up the competitiveness of its tech industries, the finance ministry said, adding that a rising wave of protectionist policies might also dent South Korea’s trade-reliant economy.
Technology exports account for roughly one-third of South Korea’s shipments abroad.
The economy is expected to be on course to grow at least 2 percent this year compared with last year, particularly on the back of strong demand for semiconductors, including memory chips used in artificial intelligence development.
Forecasts among economists for next year are turning less optimistic since the export rally has softened in recent months.
Officials also worry Trump could get tougher on US trading partners after he assumes office in January.
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