S Korea to invest $19bn to support semiconductor sector

South Korea will spend another 26 trillion won ($19bn) in funding to support its semiconductor sector, said deputy prime minister Choi Sang-mok on 23 May in an inter-agency meeting.

"This package will cover the entire semiconductor ecosystem, ranging from manufacturing facilities, fabless and material parts equipment fields to human resources," said Choi.

About W18.1 trillion from the package will be launched this year in the form of financial support, which includes W17 trillion in a loan program to fund semiconductor investment at "preferential interest rates", and the remaining W1.1 trillion set aside to act as a semiconductor ecosystem fund.

The application period for its national strategic technology tax credits will be extended, with the scope of research and development tax credits being expanded to cover expenses such as chip design software purchase costs, said Choi. About W5 trillion of investment is now slated to be injected into "vulnerable spots", such as semiconductor research and development as well as human resources over the coming three years, up from W3 trillion over the past three years.

The South Korean government will also strengthen its infrastructural support for roads, water supply and power to accelerate the launch of its semiconductor mega-cluster. The ambitious plan, which was unveiled earlier this year, involves W622 trillion of investment from major semiconductor firms by 2047. South Korea is looking to capture 10pc of the global chips market by 2030.

The country earlier this month pledged W9.7 trillion to achieve greater self-sufficiency in its battery supply chains. The country also unveiled plans last year to push for export expansion projects in energy transition sectors such as electric vehicles (EV), secondary batteries and hydrogen.

EV exports

But the country experienced weak foreign and domestic demand for its battery EVs, plug-in hybrid EVs and hydrogen-fuelled models in January-March, given a global EV growth slowdown this year.

But hybrid vehicle growth continued to drive South Korea's eco-friendly vehicle export revenue in April, while battery EV's downtrend persisted. South Korea's export revenues for its eco-friendly vehicles hit an all-time high of $2.29bn in April, breaking the $2.27bn record last set in March 2023, according to South Korea's trade and industry ministry (Motie).

The country exported 73,779 units of eco-friendly vehicles in April, up by 17pc on the year and 14pc on the month. Exports of hybrid vehicles rose by more than 53pc on the year and almost 27pc on the month to 42,439 units, while battery EVs fell by 12pc on the year and 7.7pc on the month to 25,537 units.

Its auto export revenues in April came in at $6.8bn, which also broke the previous record last set in November 2023, marking steady progress towards a $75bn target in 2024.

By Joseph Ho