Will K-Chips Act survive ruling bloc's defeat? – 코리아타임스
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President Yoon Suk Yeol speaks during a meeting on pending issues in the semiconductor industry at the presidential office in Seoul, Tuesday. Yonhap
The Yoon Suk Yeol administration’s efforts to support the semiconductor industry may face setbacks following the ruling People Power Party’s (PPP) pulverizing defeat to the main opposition Democratic Party of Korea (DPK) in Wednesday’s general election, according to industry officials and experts Friday.
With the opposition’s decisive victory, uncertainty has clouded the future of the Yoon administration’s plans to expand incentives for semiconductor companies and extend tax incentives for these companies under the so-called K-Chips Act, which will expire at the end of this year.
At Wednesday’s election to choose 300 members of the National Assembly for four years from May 30 to May 29, 2028, the PPP and its satellite party for proportional representation won 108 seats combined, while the DPK and its satellite party secured 175.
The bill, originally called the Restriction of Special Taxation Act, was passed at the National Assembly in March last year. It is designed to raise the tax deduction rate for investments in national strategic technology facilities from 8 percent to 15 percent for large corporations such as Samsung Electronics and SK hynix, and from 16 percent to 25 percent for small and medium-sized enterprises.
This act has a sunset provision that requires legislative amendment for companies to continue receiving tax benefits in the following years. Earlier this year, the ruling party proposed an amendment to extend the act until 2030, but discussions have since stalled.
Industry officials and experts said that at a time when countries are rolling up their sleeves to offer substantial incentives to companies investing in their chip industries, Korea, where the semiconductor industry accounts for a significant portion of the national economy, is urged to offer more incentives to sustain national competitiveness and create jobs.
“The government has been implementing policies to support the semiconductor industry, such as the K-Chips Act and nurturing future professionals. However, the size of support is rather smaller compared to those of other countries such as the United States and Japan,” an industry official in the local chip industry said on condition of anonymity. “Continuous support for the semiconductor industry is necessary to maintain competitiveness.”
Kim Dae-jong, a professor of business at Sejong University, said that there should be no distinction between the ruling and opposition parties on this issue, predicting that the main opposition party would cooperate with the ruling party and the current administration.
“The opposition party is expected to agree on strengthening support for semiconductor companies. Currently, the U.S. is offering enormous support not only to its domestic company, Intel, but also to foreign companies like Samsung and TSMC that are expanding chip production facilities on its soil,” Kim said.
“Regardless of party affiliation, the opposition should cooperate to ensure that semiconductor companies remain in Korea.”
The professor emphasized that investments in the semiconductor industry here ultimately lead to job creation, and the country is urged to provide a favorable business environment for these companies.
“Companies are not building factories in Korea and are moving to the U.S. or Vietnam, resulting in only a 45 percent employment rate for university graduates. This is because Korea does not have a favorable business environment,” he said.
“Support for chip companies should not be viewed as a privilege for large corporations. The political parties must not forget that the U.S. is also trying to attract companies like Samsung to its mainland to create more jobs.”
Yoon has been strongly pushing for support for semiconductor companies, saying “the current chip competition is an industrial war and a total war between nations.” A day before the general elections, the president announced that the government would invest in the AI and AI semiconductor fields until 2027 to make the country one of the top three nations in AI.
“We must have a total response system that matches a wartime situation. We will comprehensively analyze the investment environment and support systems of major countries and prepare bold support measures tailored to Korean conditions,” the president said Tuesday in a meeting with chip companies.
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