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South Korea enhances semiconductor strategy after Taiwan quake

In the wake of a seismic event rattling Taiwan, and amidst the dawn of the AI era, South Korea’s governmental bodies and corporate giants have convened to assess supply chain vulnerabilities. This gathering aims to fast-track the Semiconductor Mega Cluster (SMC) project in South Korea, compelling a comprehensive overhaul of tax relief mechanisms.

As per reports from South Korean media outlets Money Today and Yonhap News Agency, President Yoon Suk-yeol presided over a high-level meeting to deliberate on global semiconductor supply chain dynamics, progress on the SMC initiative, and policy advocacy for AI-driven semiconductor innovations, spurred by recent events including the earthquake in Taiwan.

Distinguished attendees encompassed not only governmental authorities such as the Ministry of Science and ICT (MSIT), the Ministry of Trade, Industry and Energy (MOTIE), and other key ministries but also corporate titans including Samsung Electronics, SK Hynix, Naver, and Sapeon Korea, a prominent AI chip developer.

While external factors like the earthquake in Taiwan have thus far had limited repercussions on South Korea’s semiconductor landscape, uncertainties linger.

Meanwhile, Samsung and SK Hynix made a resounding joint announcement in January 2024, pledging a staggering investment of KRW622 trillion (approximately US$470 billion) for establishing the SMC in South Korea. Following the conclave, the South Korean government vowed to bolster budgetary support, elevating support thresholds for various industrial parks from 5-30% to 15-30%.

Samsung’s blueprint entails the construction of the System Semiconductor Cluster in Yongin, South Korea, with investments potentially soaring to KRW360 trillion by 2047. Furthermore, Samsung plans additional investments of KRW120 trillion for creating the Hwaseong Semiconductor Cluster and KRW20 trillion won for the Next-generation Semiconductor R&D Cluster. Notably, the Yongin Semiconductor Cluster is set to leverage South Korean government protocols such as environmental impact assessments and land compensation schemes to streamline construction timelines significantly.

Conversely, SK Hynix envisions the establishment of a memory cluster in Yongin’s Yeonsan district, with investments peaking at KRW122 trillion by 2045. However, apart from securing 270,000 tons of water, SK Hynix anticipates a commensurate uptick in water demand. Thus, once corporate entities and South Korean local administrations devise water supply blueprints, they will promptly finalize water provisioning strategies.

Furthermore, in response to global “subsidy wars,” the South Korean government has introduced its own version of the Chip Act to foster investment in cutting-edge technology. While this initiative offers tax relief incentives for facility investments, the preferential treatment for facility investment tax deductions is slated to lapse by the end of 2024. The South Korean government endeavors to prolong tax relief incentives and expedite the formulation of investment stimulus measures.

With the AI epoch looming large, South Korea has set its sights on emerging as one of the preeminent global AI powerhouses. President Yoon Suk-yeol has unveiled ambitious plans to channel KRW9.4 trillion into AI and AI semiconductor domains by 2027. Furthermore, to catalyze the growth of innovative AI chip enterprises, a fund worth approximately KRW1.4 trillion is slated for establishment.

The MSIT and MOTIE have mapped out strategies to channel national research and development efforts toward AI semiconductor technological breakthroughs, while simultaneously ramping up investment support to nurture the entire AI semiconductor value chain. Moreover, the South Korean government is slated to host the Seoul AI Summit in May 2024, poised to bolster South Korea’s global leadership in shaping AI ethics regulations. Digi Times

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