South Korea announces major tax breaks and loans to strengthen the local chip industry

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© Reuters. FILE PHOTO: The SK Hynix logo can be seen on April 25, 2016 at the headquarters in Seongnam, South Korea. REUTERS / Kim Hong-Ji

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From Joyce Lee

SEOUL (Reuters) – South Korea announced major tax breaks and 1 trillion won ($ 883 million) loans to the local chip industry on Thursday as the company navigates a challenging operating environment amid a global chip shortage.

Many countries are working to strengthen local chip supply chains as the severe shortage affects production in industries such as automobiles. In March, US President Joe Biden announced plans to invest $ 50 billion in semiconductor manufacturing and research.

According to the Korea Semiconductor Industry Association, 153 chip companies, including the world’s leading No. 1 and 2 memory chip manufacturers Samsung Electronics (OTC 🙂 and SK Hynix, already have plans to grow a total of 510 trillion won or more between this year and 2030 invest.

“As semiconductor competition increases worldwide, it is clear that we must also increase our competitiveness in the semiconductor industry,” said South Korean President Moon Jae-in earlier this week.

Current domestic investments include Samsung (KS 🙂 ‘s planned third chip factory in Pyeongtaek, south of Seoul, which began site preparation last year and is expected to be completed in 2022, a Pyeongtaek city official said.

SK Hynix is ​​considering acquiring additional manufacturing capacity for 8-inch chip contracts, the Department of Commerce, Industry and Energy said in a statement Thursday, adding that no final decision has been made.

The government will increase tax breaks to 6% from the current 3% or less for investments between the second half of 2021 and 2024 for large companies operating “strategic key technologies” including semiconductors, the ministry said in a statement.

The government will also offer long-term loans of around 1 trillion won to increase production capacity for 8-inch wafer chip contracts and to invest in materials and packaging.

Samsung Electronics, Hyundai Motor, the ministry and industry associations also agreed to join forces on Thursday to respond to the car chip shortage, the presidential office said in its statement, without giving any details.

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