South Korea to boost semiconductor industry with tax credit benefits

South Korean President Yoon Suk Yeol plans to extend tax credits on heavy investments in the domestic semiconductor industry to boost employment and attract more talent. The government aims to enhance the competitiveness of high-tech sectors, including chips, displays, and batteries.

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South Korean President Yoon Suk Yeol has unveiled a substantial plan to extend tax benefits for investments in the nation’s semiconductor industry, aiming to stimulate employment and attract top talent. With major players like Samsung Electronics and SK Hynix, South Korea strategically expands tax breaks to bolster its position in high-tech sectors such as chips, displays, and batteries.

A key element of the strategy involves constructing a mega-chip cluster in Yongin, positioned as the world’s largest high-tech chipmaking complex. Anticipating an initial investment of 622 trillion won ($470.82 billion) and the creation of at least 3 million jobs over two decades, President Yoon describes the endeavour as a ‘war’ in chips, underscoring the government’s unwavering commitment.

The tax credit extension aligns with the broader government plan unveiled in January 2023, offering substantial tax breaks to semiconductor and technology companies investing domestically to enhance supply-chain security and stimulate economic growth. Capital investment by these companies could result in a tax deduction of up to 35%, potentially saving over 3.6 trillion won ($2.82 billion) in 2024 tax payments, according to the finance ministry. However, these incentives were initially set to expire this year. This initiative aligns with global efforts, including those by Taiwan and the United States, to bring chip production onshore and strengthen domestic industries.

Addressing the imminent expiration of tax deductions for such investments, President Yoon affirms the extension of the law to ensure continuous investment support.

President Yoon argues that increased semiconductor investments will yield long-term benefits, including job creation and enhanced state tax income, refuting claims of preferential treatment to large conglomerates. The commitment of tech giant Samsung Electronics, pledging $230 billion investment in the next decade, reinforces the collaborative effort between the government and industry players to drive technological innovation and maintain global leadership in semiconductor production.