South Korea’s incentives for semiconductor investment have been found to be only 22 percent of the level in the United States and 15 percent in Japan, data showed on Monday.

The figures come at a time when major countries around the world are engaged in a fierce competition for incentives for large-scale investments.

According to an analysis by the Korea Semiconductor Industry Association (KSIA) on Monday, the incentives received by companies investing in Korea amounted to 1.2 trillion won ($864.38 million) when assuming they invest 20 trillion won to build advanced semiconductor production facilities in the country.

On the other hand, companies investing in the U.S. and Japan received incentives totaling 5.5 trillion won and 8 trillion won, respectively, including subsidies and tax benefits, under the same conditions.

The analysis was based on semiconductor-related legislation in Korea, the U.S., and Japan and on the assumption that out of the 20 trillion won investment in a new semiconductor fab (semiconductor production facility), 6 trillion won would go to land and buildings, 4 trillion won to infrastructure facilities, and 10 trillion won to process equipment.

Currently, Korea‘s investment incentives only consist of a 15 percent tax credit for facility investment. Companies investing in semiconductor equipment worth 10 trillion won in the country receive only 1.5 trillion won worth of tax benefits.

Even this tax credit is further reduced.

Corporations receiving tax reductions in the country must pay a special tax for rural areas equal to 20 percent of their tax savings under the country’s Act on Special Rural Development Tax. As a result, their final incentives are reduced to 1.2 trillion won.

The U.S. offers 5.5 trillion won in tax credits by combining direct subsidies (5 to 15 percent of investment) and facility investment tax deductions (25 percent of investment). This amounts to receiving 27.5 percent of the total investment as incentives.

In Japan, direct subsidies (up to 50 percent of investment) alone amount to nearly 8 trillion won.

When adding to this the 2.8 trillion won in facility investment tax credits (20 percent of investment) from the “domestic production promotion tax incentive in strategic areas” being pursued by the Japanese government, the incentives increase to 10.8 trillion won.

“The Korean government is promoting semiconductor support measures centered on tax credits without subsidies,” KSIA Vice Chairman Kim Jeong-hoi said. “Compared to competing countries, its scale of incentives for companies investing in the country is significantly small.”



In a related development, the U.S. government announced on Monday (local time) that it will provide up to $6.4 billion to Korean tech giant Samsung Electronics Co., which is building a factory in Taylor, Texas, under its CHIPS Act.

“This announcement will bring more than $40 billion in investment from Samsung and solidify a cutting-edge semiconductor ecosystem in central Texas,” U.S. President Joe Biden said.

Gina Raimondo, the U.S. Secretary of Commerce, also commented that “the semiconductors Samsung will produce in Texas are critical components of cutting-edge technology, ranging from AI to high-performance computing and 5G communication.”

According to the U.S. announcement, the Taylor factory will include two state-of-the-art foundry fabs for 4 nanometer (nm) and 2nm processes, a research and development (R&D) fab for advanced technology R&D, and advanced packaging facilities for 3D high-bandwidth memory (HBM) and 2.5D packaging.

Samsung Electronics is expected to take advantage of the U.S. government’s subsidies to strengthen its local production system, aiming to target big tech companies with high demand for AI semiconductors.

The Korean chipmaker is expected to go head-to-head with industry leader Taiwan Semiconductor Manufacturing Co. (TSMC) and Intel Corp., a latecomer which is closely following Samsung, in the U.S.

By Choi Seung-jin, Oh Chan-jong, Seong Seung-hoon, and Yoon Yeon-hae

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