The fact that the U.S. and Japan provide 27.5 percent and 40 percent of their total investment (54 p.. – 매일경제
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The fact that the U.S. and Japan provide 27.5 percent and 40 percent of their total investment (54 percent when tax credits are applied) as incentives for the construction of advanced semiconductor fabs will inevitably be disadvantageous to Korean companies with major production bases in Korea.
Domestic companies have no choice but to compete on the “slanted playground” with foreign companies backed by their government’s full support. In particular, the tax credit benefits provided by Korea have many loopholes in the system, including excluding the cost of building clean room facilities essential for semiconductor manufacturing.
According to the Korea Semiconductor Industry Association on the 15th, major countries such as the U.S. and Japan are scrambling to implement unconventional semiconductor support policies to reorganize the semiconductor supply chain in their favor. It is creating unprecedented large-scale subsidies and sucking up corporate investment through tax support in order to increase its advanced semiconductor manufacturing capabilities.
The US government has raised 39 billion dollars (about 52 trillion won) under the Semiconductor Support Act (CHIPS Act), providing up to 15% of corporate investment as subsidies. It also supports a 25% tax credit.
On the 20th of last month (local time), the U.S. government announced that it would provide up to $8.5 billion (about 11.5 trillion won) in direct subsidies and $11 billion (about 14.9 trillion won) in loans to Intel. Intel is investing 100 billion dollars to build advanced semiconductor production facilities in four states, including Arizona and Ohio.
On the 8th, the U.S. government announced that it will provide up to $6.6 billion (about 8.9 trillion won) in direct subsidies and $5 billion (about 6.8 trillion won) in government-backed loans to Taiwan’s TSMC. TSMC also plans to apply for investment tax credit. On the same day, TSMC decided to build three high-tech semiconductor plants in Phoenix, Arizona, and also announced plans to invest more than $65 billion (about 88 trillion won) in this project.
The U.S. government has also decided to provide more than $6 billion (about 8.1 trillion won) in subsidies to Samsung Electronics’ foundry plant in Taylor City, Texas. The U.S. is attracting global semiconductor companies with massive subsidies.
The Japanese government’s incentives are more drastic than this. The Japanese government, which raised 1.7 trillion yen (about 15.2 trillion won) with the Advanced Semiconductor Production Base Maintenance Fund, provides subsidies for up to 50% of semiconductor companies’ investment in Japan. Based on this, TSMC and Micron succeeded in attracting fab investment.
In particular, TSMC is expected to receive 476 billion yen (about 4.2 trillion won) and 732 billion yen (about 6.5 trillion won) from the Japanese government as subsidies for Plant 1 and Plant 2, including 1 trillion yen (about 8.9 trillion won) in Kumamoto Plant 1 and 2 trillion yen (about 17.8 trillion won).
The Japanese government also included a plan to establish a “strategic domestic production promotion tax system” that deducts 20% of facility investment in this year’s tax amendment. This plan is currently being considered by the Japanese parliament, and if the plan is confirmed, the size of the incentive will increase.
In contrast, Korea is pursuing a policy to support semiconductor investment centered on tax credits. The national strategic technology facility investment tax credit rate is expected to sunset at the end of this year at 15% for large and medium-sized companies and 25% for small and medium-sized companies. The “Temporary Investment Tax Credit,” which deducts an additional 10% of the average investment excess over the previous three years, expired at the end of last year.
The biggest difference between the U.S. and Japan, which have introduced or are about to introduce a similar tax credit system, and Korea is the scope of tax credit.
In Korea, only machinery is recognized as an asset subject to tax credit, but in addition to machinery, the U.S. and Japan, infrastructure facilities such as “clean rooms” that are essential for semiconductor manufacturing are also included in the tax credit.
As a result, there is a difference in tax benefits that will be received if a state-of-the-art semiconductor fab is built by investing a total of 20 trillion won, including 6 trillion won for site purchase and building construction, 4 trillion won for infrastructure facilities, and 10 trillion won for process equipment.
When investing in Korea, only 10 trillion won invested in process equipment can be deducted, but in the U.S. and Japan, 14 trillion won, including 4 trillion won in investment in infrastructure facilities, will be eligible for tax deductions.
As a result, in the United States, a 25% tax credit rate will be applied to a total of 3.5 trillion won in tax benefits. If the 20% tax credit system is implemented in Japan, 2.8 trillion won in taxes can be returned just by tax benefits.
Assuming that the U.S. pays an average of 10% of its investment and Japan pays an average of 40% of its investment as subsidies for investments, the amount of subsidies for 20 trillion won is 2 trillion won in the U.S. and 8 trillion won in Japan. In other words, subsidies and tax credits can be received 5.5 trillion won in the United States and 10.8 trillion won in Japan.
Moreover, Korean investment companies should also consider a 20% special tax burden on farming and fishing villages. This means that only 80% of tax credits can be reduced in practice. As a result, 1.2 trillion won excluding the special tax burden from the tax credit will be the final incentive.
Ko Jong-wan, head of strategic planning at the Korea Semiconductor Industry Association, explained, “Korean semiconductor companies are absolutely at a disadvantage compared to other competitors by the current tax credit benefits without subsidies.”
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