Asia Express - East Asian ICT
South Korea Launches New Chip Act amid the US-China Trade War
March 31, 2023

The South Korea government recently approved a bill, known as the "K-Chips Act", with an aim to boost its semiconductor industry with preferential policies like tax breaks to attract more investments, the Commercial Daily reported on March 31. The Act comes after Korean President Yoon Suk Yeol's announcement in mid-March that the country will invest US$422 billion key high-tech areas such as chips and EVs (Electric Vehicles). Under the act, the country will increase the tax credit for major companies investing in manufacturing facilities from the current 7% to 15% while the SMEs (Small and Medium Enterprises) from the current 16% to 25%. This is expected to lure more domestic investments from Korean tech giants such as Samsung and SK Hynix with financial incentives and policy support. Ultimately, South Korea hopes to reduce the nation's reliance on semiconductor imports, especially from the United States and China. In addition to South Korean, the US has passed its own Chips Act while China also launched the "Made in China 2025" initiative. The tech sector currently accounts for about 12% of South Korea's total exports. Shipment value of the Taiwanese semiconductor manufacturing industry reached US$21.8 billion in the fourth quarter of 2022, down 4.1% sequentially but up 12.3% year-on-year, according to MIC (Market Intelligence & Consulting Institute). 

MIC added that TSMC, the leader in the semiconductor foundry industry, has experienced a decrease in its 8-inch wafer utilization rate by about 10% while its 12-inch wafer utilization rate has remained high. In response to the decrease in demand and utilization rates, semiconductor foundries have reduced their capital expenditures. TSMC lowered its 2022 capital expenditure from US$40 billion to US$36 billion.

Established in 1987, MIC is a division of III (Institute for Information Industry), a major government think tank, and one of the leading IT research institutes in Taiwan.