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South Korea creates $451bn semiconductor stimulus package

Samsung and SK Hynix singled out as nation tries to become a titan

South Korea's government announced a support package worth 510 trillion won (US$451bn) to bolster in-country chip production with the hopes of becoming a global supply chain leader.

Additionally, the Finance Ministry will raise tax deduction ratio for semiconductor R&D to forty percent, up from the current 30 points, and double deductions for facility investments to six percent.

Over 150 Korean semiconductor companies qualify for the program, even existing giants Samsung and SK Hynix.

“The entire semiconductor industry is facing a watershed moment and now is the time to chart out a plan for long-term strategy and investment,” said Samsung’s vice chairman Kinam Kim in a canned statement, adding that Samsung “will continue to make preemptive investments to lead the industry.”

Samsung will invest 171 trillion won (US$151bn) in System LSI and Foundry businesses through to the year 2030 to compete with the likes of TSMC, which plans to invest US$100bn over the next three years (and raise prices, too). Samsung's new number is 38 trillion won more than it previously announced in April 2019.

As part of its announcement, Samsung also revealed that construction has begun on its new Pyeongtaek manufacturing line with completion slated for the second half of 2022. The facility will produce 14-nanometer DRAM and 5-nanometer logic semiconductors based on extreme ultraviolet (EUV) lithography.

Earlier this week, SK Hynix's co-CEO and vice chairman Park Jung-Ho said he was considering doubling the company's foundry capacity, either by adding new equipment to its production lines, or by pursuing mergers and acquisitions. Now Park has committed to US$97bn to expand existing facilities on top of US$106bn for four new plants in the South Korean city Yongin.

The new investments are on trend as tech companies seek to develop local capacity rather than relying on foreign chipmakers amid the global semiconductor shortage.

In a conversation about the shortage, Forrester’s vice president and research director, Glenn O’Donnell, told The Register today:

Every company is out there at the drawing board to reassess supply chains.

Governments are spending like drunken sailors to help boost tech innovation. Should they offer tax breaks and fund consortia? Yes, that’s the kind of stuff that has to happen.

O’Donnell told The Reg he expects the shortage to last another two years while new foundries are built and production capacity comes on line. Rival analyst firm Gartner has declared the semiconductor shortage will last until Q2 2022. ®

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