SEOUL -- South Korea is going all out to bolster its critical semiconductor industry, with the government on Thursday announcing a plan by companies to invest 510 trillion won ($451 billion) and beefed-up tax benefits to boost chipmakers' competitiveness amid a critical global shortage of the key components.
The corporate outlays through 2030, including 171 trillion won announced by Samsung Electronics alone, come as the country is facing severe challenges from competitors including Taiwan Semiconductor Manufacturing Co., which leads the world in the output of foundry chips -- those made for other companies.
"Our government will unite with companies to form a semiconductor powerhouse," said President Moon Jae-in. "We will support companies concretely."
As part of the effort, the Finance Ministry said it will raise the tax deduction ratio for semiconductor research and development investments by big companies to 40% from the current 30%, paving the way for Samsung and SK Hynix to benefit from the eased financial burden.
The chipmakers also will enjoy higher deductions for investments in facilities, as the government is doubling that ratio to 6%, the ministry said.
The announcement comes one month after Moon hosted a meeting with executives in the semiconductor, auto and shipbuilding industries to discuss how to strengthen their global position.
"We set up this K-semiconductor strategy in cooperation with the private sector to cope with the rapidly changing situation surrounding semiconductors amid the chip shortage," said Trade, Industry and Energy Minister Moon Seung-wook. "We can lead the global supply chain and contribute to the global economy if we can be a stable chip supplier to meet global demand."
The timing is also critical as President Moon will depart for the U.S. next week for a summit with President Joe Biden at the White House on May 21. The presidential Blue House said that the two leaders will discuss economic and trade cooperation, with analysts expecting chipmaking to be a key issue in the dialogue.
Market watchers say that Samsung is likely to announce its plan to invest about $17 billion in building new foundry chipmaking lines in Austin, Texas, where it already has a facility, or elsewhere the country during Moon's visit. Samsung is planning to expand its foundry business to catch up with rival TSMC.
Samsung is the world's biggest memory chipmaker, accounting for 42% of market share in DRAM chips and one-third in NAND chips. However, it is chasing TSMC in the foundry business, where the Taiwanese company leads the market with a share of more than 50%.
The figure for corporate spending announced by the government is based on a survey of 153 companies last month conducted by the Korea Semiconductor Industry Association.
On Thursday, Samsung said that it will increase investments in its system LSI and foundry businesses to a total of 171 trillion won through 2030, to "accelerate research into cutting-edge semiconductor process technology and construction of a new production facility."
Samsung said the figure is an increase of 38 trillion from its previous plan announced in April 2019. It added that its expects the spending will boost its goal of leading the world in logic chips by 2030.
"The entire semiconductor industry is facing a watershed moment and now is the time to chart out a plan for long-term strategy and investment," Kim Ki-nam, Samsung vice chairman and head of the Device Solutions Division, said in the release. "For the memory business, where Samsung has maintained its undisputed leadership position, the company will continue to make preemptive investments to lead the industry."