S. Korea announces bigger tax breaks, loans to bolster chip industry

People pass by advertisements of Samsung Electronics in Seoul, South Korea, April 28, 2021. /CFP

South Korea on Thursday announced bigger tax breaks plus 1 trillion won ($883 million) in loans for the local chip industry as it navigates a challenging operating environment amid a global chip shortage.

Some 153 chip companies, including the world's top two memory chip makers Samsung Electronics and SK Hynix, already have plans to invest a combined 510 trillion won ($449 billion) or more between this year and 2030, according to the Korea Semiconductor Industry Association.

Current investments in South Korea include Samsung's planned third chip plant 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 8-inch chip contract manufacturing capacity, the Ministry of Trade, Industry and Energy said in a statement on Thursday, adding that no final decision has been made.

The government will increase tax breaks to 6 percent from the current 3 percent or lower for capital expenditures between the second half of 2021 to 2024 for large corporations conducting "key strategic technology" including semiconductors, the ministry said in a statement.

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

Samsung Electronics, Hyundai Motor, the ministry and industry associations also agreed to join efforts to respond to the shortage of auto chips on Thursday, the presidential office said in its statement, without providing any details.

Many countries are working to bolster local chip supply chains as the severe shortage affects production in industries, such as autos. China's leading chipmaker the Semiconductor Manufacturing International Corporation in March inked an agreement with Shenzhen's government to build a $2.35 billion chip-making plant in the southern city.

(With input from Reuters)