South Korea's ruling and opposition parties have reached a preliminary consensus on the Semiconductor Special Act, though its passage may be delayed until 2026, and the law faces criticism for offering comparatively weak support measures against competing countries.
Reports from Maeil Business Newspaper and eToday say that over the past five years, the US, China, Japan, and Germany have invested an estimated US$137.4 billion in their semiconductor industries, with most funding directed to semiconductor production equipment and governments providing upfront cash subsidies. By contrast, the draft South Korean law offers up to a 25% tax credit without direct cash subsidies, a design that industry insiders warn could undermine national competitiveness.
Industry sources cite large capital requirements as a key concern. SK Hynix's Cheongju M15X wafer fab is reported to require total investments of up to KRW20 trillion (approx. US$13.86 billion). Rising semiconductor equipment prices and soaring local construction costs are said to add further financial pressure. Samsung Electronics has launched investments at its Pyeongtaek P5 plant, with media reports of possible additional capital injections, and investment amounts at the Yongin National Semiconductor Industrial Complex are reported to be continuing to escalate.
Under the proposed law, large corporations would be eligible for a 15-25% tax credit on equipment investments. Critics note that tax credits provide relief only after firms generate profits and pay corporate taxes, so companies operating at a loss during cyclical downturns cannot immediately benefit, potentially delaying critical investments.
The draft appears amid expanding subsidies in the US, Japan, and Germany and growing Chinese support focused on advanced foundry processes, high-bandwidth memory (HBM), 3D NAND Flash, and DRAM. Political divisions between the ruling party and the opposition over provisions, including exceptions to the 52-hour workweek rule embedded in the bill, may prolong debate in the National Assembly when it reconvenes in 2026.
Article translated by Jingyue Hsiao and edited by Jack Wu
