Chip-funding ‘warfare’ continues with South Korea’s $19 billion package
Less than two weeks ago, South Korea’s finance minister said the country was preparing to shell out $7.3 billion for its chip sector, to keep up with the torrents of state funding that are flowing around the world. Today, the government unveiled its promised package—and at $19 billion it’s more than twice as big as previously signaled.
“As we all know, semiconductors are a field where all-out national warfare is underway,” President Yoon Suk Yeol said, according to Reuters. “Win or lose, that depends on who can make cutting-edge semiconductors first.”
South Korea is one of the world’s top chipmaking nations, with its strength specifically lying in the memory market. Production has been booming recently, but the South Korean government would very much like the country to make more non-memory chips, where its share remains in the order of 2%. (The big beast, of course, remains Taiwan, which accounts for around a fifth of the world’s overall semiconductor industry, and which makes more than 90% of the most advanced chips.)
The new funding will mostly be used to provide low-interest loans for semiconductor firms’ private investments and to extend their tax incentives, and also to establish a fund for fabless firms—that is, chip companies that outsource the manufacturing to the likes of Taiwan’s TSMC—and for parts and equipment companies.
However, the Korea Herald reports, South Korea won’t be providing any direct subsidies. Countries like the U.S. may be going subsidy-mad—$39 billion of the $52 billion appropriated under its CHIPS and Science Act is being doled out in straight-up grants—but, according to Finance Minister Choi Sang-mok, those are countries that “have to build chip facilities from scratch.”
“Countries with decent chip manufacturing capability, like Korea and Taiwan, do not have direct subsidies,” Choi said, per the Herald. “What we are offering are tax benefits, and they are similar to subsidies in their character. When it comes to tax credits, we offer the highest level of incentives.”
According to recent Bloomberg number-crunching, governments worldwide have so far earmarked $380 billion to boost chip production. This is mostly down to the West’s gradual uncoupling from China and fears over a potential Chinese invasion of Taiwan, but—in the zoomed-out sweep of history—it’s also a return to the good old-fashioned economic model of making stuff yourself, rather than contracting production out to the someone on the other side of the world.
Speaking of the CHIPS Act, the latest beneficiary of Washington’s largesse is Absolics, which will be taking up to $75 million in American subsidies to develop and make a type of glass that will be used in advanced packaging—i.e., bundling different types of chip into a single chipset.
Investment in advanced packaging is crucial if you want to end up with the kind of power-efficient chipsets that are used in AI and high-performance computing. And at this point, it’s worth pointing out that Absolics is over 80% owned by … South Korea’s second-largest conglomerate, SK Group, which is also parent of the world’s second-biggest memory-chip maker, SK Hynix.
Meanwhile, the largest South Korean conglomerate and memory-chip maker, Samsung, is also happily raking in up to $6.4 billion in CHIPS Act subsidies so it can build out R&D and advanced packaging capacity in the U.S. All-out national warfare indeed!
More news below.
David Meyer
Want to send thoughts or suggestions to Data Sheet? Drop a line here.
This story was originally featured on Fortune.com
