Samsung Set to Announce Additional Investments, Imminent Subsidies – BusinessKorea
As the global semiconductor hegemony intensifies, companies are fiercely competing in investments. Samsung Electronics is expected to announce additional investments locally, following substantial subsidies received by competitors Intel and Taiwan’s TSMC from the U.S. government.
Compared to this, domestic semiconductor investments in Korea are relatively subdued. Industry comparisons highlight the TSMC Kumamoto plant in Japan, which was completed in just one and a half years, against the Yongin semiconductor cluster in Korea, which hasn’t even started properly after more than three years. This has sparked suggestions that the Korean government should adopt more direct and proactive support measures.
However, with the 22nd National Assembly elections ending in a victory for the opposition, concerns about deteriorating competitiveness in the semiconductor industry have arisen. Both political sides promised in the April 10 elections to extend the “K-Chips Act” (a revision of the Tax Incentive Limitation Act), yet they differed on direct subsidy support.
According to foreign media and industry sources on April 14, Samsung Electronics is set to announce plans this week for an additional semiconductor factory in the U.S., coinciding with the U.S. government’s subsidy announcement, potentially as early as April 15 (local time).
Samsung Electronics is currently constructing a foundry (semiconductor manufacturing) plant in Taylor, Texas, with an investment of US$17 billion. The company plans to announce additional investments in another semiconductor plant and a state-of-the-art packaging and R&D center, according to reports from The Wall Street Journal and Reuters. Once announced, Samsung’s total U.S. investment is expected to reach US$44 billion.
This additional investment plan by Samsung Electronics is reportedly influenced by the U.S. government’s astronomical subsidies. Previously, the U.S. government decided to support TSMC with more than double the expected US$5 billion, amounting to US$11.6 billion.
In response, TSMC plans to increase its investment from the planned US$40 billion to US$65 billion and add a third factory in Arizona by 2030. Samsung Electronics is expected to follow a similar course.
The U.S. government is known to provide Samsung Electronics with over US$6 billion in subsidies, making the subsidy ratio to investment amount approximately 13.6%, similar to TSMC’s 10.1%.
The competition among semiconductor firms in the U.S. is expected to intensify further. Taiwanese media have reported that TSMC’s secured construction site in Phoenix, Arizona, spans 1,100 acres (about 4,452 square kilometers), suggesting the possibility of increasing local semiconductor production facilities from three to six. This expansion is seen as an attempt to meet the local demands of big tech companies like Nvidia and Apple, considering geopolitical risks.
Another Korean semiconductor company, SK hynix, also anticipates benefiting from subsidies under the U.S. Semiconductor Act. SK hynix plans to invest US$3.87 billion to build an advanced packaging production base for AI memory in Indiana, in the U.S.
With the global power struggle over advanced industries intensifying, attention is turning to the next National Assembly. The Korean government is viewed as significantly lagging behind its competitors in supporting the semiconductor industry, a sentiment reinforced by the recent promises made by all political parties during the April 10th elections.
Industry leaders, including Kyung Kye-hyun, President of Samsung Electronics DS Division, and Kwak No-jung, President of SK hynix, have emphasized the need for various support measures including subsidies, which they proposed during a meeting with Minister of Trade, Industry, and Energy, Ahn Duk-geun last February.
However, the Democratic Party, which won a decisive victory in the recent elections, did not include direct subsidy support in its semiconductor pledge. With the government and opposition parties differing in their positions, the discussion of semiconductor industry support measures, including amendments to the K-Chips Act, is expected to face challenges. The K-Chips Act, initially opposed by the Democratic Party as “conglomerate favoritism” and “tax cuts for the rich,” faced delays in passing through the plenary session.
National Assembly Member Kim Hak-yong, from the People Power Party, proposed extending the sunset of the K-Chips Act until 2030 in a revision of the Tax Incentive Limitation Act this January, but it has yet to be discussed thoroughly and remains in the committee. With the 21st National Assembly term ending next month on May 29, the likelihood of it passing in this session appears slim.
The K-Chips Act allows semiconductor companies to deduct up to 15% for large enterprises and up to 25% for small and medium-sized enterprises from their taxes when investing in facilities. If the K-Chips Act sunsets as scheduled at the end of this year, the tax deduction rate for semiconductor investments by large companies will drop from 15% to 8%.
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