South Korea reveals massive tax breaks to invigorate chip industry

South Korea is introducing bigger tax breaks and 1 trillion won (£627 million) in loans across its manufacturing industry in an attempt to alleviate the ongoing global chip crisis.

The government will increase tax breaks to 6% from the current 3% or lower for capital expenditures between the second half of 2021 to 2024, according to Reuters.

This will apply to large corporations conducting “key strategic technology”, such as semiconductors, and will affect the county's first and second-largest manufacturers, Samsung and SK Hynix respectively.

It will additionally offer 1 trillion won in long-term loans for increasing 8-inch wafer chip contract manufacturing capacity and investment for materials and packaging.

Following this news, Samsung announced it would increase its investments in the country from 133 trillion to 171 trillion (£107 billion) through 2030. It hopes this will accelerate research of cutting-edge semiconductor process technology and construction of a new production facility.

The company also revealed it has begun construction of its third production line in Pyeongtaek, which is expected to be completed in the second half of 2022. It will produce 14-nanometer DRAM and 5-nanometer logic semiconductors.

“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,” said Dr. Kinam Kim, vice chairman and head of device solutions division at Samsung Electronics. “For the memory business, where Samsung has maintained its undisputed leadership position, the company will continue to make preemptive investments to lead the industry.”

It's unclear when the global semiconductor shortage affecting the technology and automotive industries will end. The founder and CEO of Dell, Michael Dell, said he expected the chip crisis “will probably continue for a few years”. He underlined that even if chip factories are built all over the world, it will take time for the industry to return to normal.

Meanwhile, in the US, tech giants have formed a new lobbying group to push the government to subsidise chip manufacturing with taxpayer money. The Semiconductors in America Coalition wants Congress to fund the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act. The act would create a 40% refundable income tax credit for semiconductor equipment and any qualified investment expenditures through 2024.