South Korea’s Ministry of Trade, Industry and Energy recently announced a draft plan for the growth of the semiconductor industry. The plan includes large-scale tax cuts and assistance for infrastructure expansion. In addition, industrial clusters of semiconductor equipment, materials and component suppliers will be established in the metropolitan area. It is reported that the South Korean government is considering increasing the tax reduction to 40%.

South Korean media businesskorea reported that the global semiconductor industry now requires more and more investment. Samsung Electronics plans to invest 28 billion U.S. dollars in semiconductor manufacturing plants this year. The world’s largest foundry company TSMC recently announced that it will invest this year’s capital. Expenditure increased to 30 billion U.S. dollars.

Compared with the two companies, Samsung Electronics is at a disadvantage. Its investment is divided into two parts: chip and foundry, while TSMC can focus on the foundry. In addition, Samsung Electronics’ domestic investments are at a disadvantage in terms of taxation. At present, large companies such as Samsung Electronics will enjoy 3% and 20% tax reductions for their domestic plant and R&D investments. Only non-large enterprises can enjoy tax reductions of 6% and 40% respectively.

At the same time, a bill issued by the United States stipulates that every semiconductor facility investment in the United States can enjoy a 40% tax deduction. TSMC plans to invest 36 billion U.S. dollars to build six factories in the United States, which may bring huge benefits to TSMC. In addition, TSMC can also reinvest the tax savings. By then, the global foundry market share gap between Samsung Electronics and TSMC will further expand. At present, TSMC's foundry market share is about three times that of Samsung.

The report said that once the South Korean government provides more tax incentives, Samsung Electronics can make more investments. South Korean semiconductor companies are currently asking the government to increase the facility investment-related exemption rate to 50%, and there is news that the South Korean government is considering increasing it to the US level. According to the 40% tax deduction, Samsung Electronics purchased 20 EUV lithography equipment at a price of approximately 3 trillion won, and can receive a tax rebate of 1.2 trillion won.

Nevertheless, the requirements of these companies still face some obstacles. For example, the Ministry of Economy and Finance of South Korea is concerned that the adjustment of tax relief rates will reduce tax revenue. In addition, adjustments do not require amendments to the enforcement decree, but require amendments to the law. In other words, the National Assembly must cooperate to achieve this goal. Experts pointed out that the speed of implementation of industry growth plans is also very important. One of the officials explained: “The government needs to implement the plan without hesitation and, at the same time, work with the European Union, the United States and China to introduce more incentives to treat the semiconductor industry as an increasingly important part of national security.