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South Korea’s President Lee Jae-myung has proposed a bold new policy to strengthen the country’s semiconductor sector by introducing up to 10% production tax credits for chips manufactured and sold within South Korea. The move marks a strategic shift away from Seoul’s traditional investment-based subsidy model, putting a stronger emphasis on rewarding local output.
A Policy Aimed at Bolstering Domestic Supply Chains
The proposal is part of President Lee’s broader industrial revitalization agenda, aimed at securing technological self-reliance in the face of intensifying global chip competition and geopolitical uncertainty. Under the plan, semiconductor firms that fabricate and sell chips in South Korea would qualify for tax relief, creating strong incentives for companies to prioritize domestic production lines.
Analysts view this as an intentional divergence from the Moon and Yoon administrations’ focus on upfront investment incentives, which favored large conglomerates’ capital spending without ensuring domestic output retention.
The new tax credit is tied to production volume, not investment pledges. It is designed to increase output while supporting SMEs and fabless firms often left out of major subsidy frameworks.
Strategic Timing and Industry Response
The announcement comes as countries including the U.S., EU, and Japan are scaling up their chip incentive plans, prompting Seoul to rethink its industrial policy toolkit. Korea remains a global leader in memory chip production but has faced non-memory and foundry competitiveness challenges.
Initial responses from the Korean Semiconductor Industry Association (KSIA) suggest cautious optimism. An official anonymously said the policy could “rebalance the playing field” for domestic producers if implemented adequately with administrative clarity.
Political and Global Context
President Lee’s plan also signals to international tech giants operating in Korea that local manufacturing will be rewarded, potentially influencing investment decisions from companies like Samsung, SK hynix, and global fabless firms seeking local partners.
While whole legislative passage will require National Assembly approval, ruling party insiders say the tax credit proposal is expected to move swiftly through parliament, given bipartisan concern over Korea’s strategic tech independence.
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