South Korea Passes Tax Break-Driven 'Chips Act' as Protectionism Fears Mount

South Korea has passed legislation giving tax breaks to its semiconductor companies in a bill being labelled as the "Korean Chips Act." At the same time, the nation's trade minister repeated its complaints that the criteria for Korean companies to access US funding are unpalatable in a possible sign of growing protectionism in the worldwide chip market. From a report: To bump up the level of tax breaks, the Korean National Assembly passed a revision bill to the Restriction of Special Taxation Act. The reductions will be given to companies investing in semiconductor production and other strategic industries in the country. These tax breaks appear to be largely in line with earlier reports regarding the Korean government's plans, and will see large corporations such as Samsung Electronics and SK hynix offered tax credits of up to 15 percent on investments into strategic technologies such as semiconductor manufacturing, up from 8 percent previously.

Raising the deduction rate from 8 percent to 15 percent would save some 2.5 trillion won ($1.9 billion) in taxes for the local chip industry, according to The Korea Herald. For small and medium-sized enterprises, the tax credit rate is set to be raised from 16 percent to 25 percent, in moves designed to bolster domestic investment in key technology sectors. The move follows the announcement of plans from the Korean government earlier this month to pour cash into several key industries including semiconductors and electric vehicles. As part of those plans, Samsung said it aimed to invest $230 billion over the next 20 years to build five new local semiconductor plants. South Korea is not the only nation offering such tax breaks. In January, Taiwan -- home to semiconductor giant TSMC -- passed similar legislation that will allow its domestic chipmakers to turn up to 25 percent of their annual research and development expenses into tax credits, in efforts to ensure the country's continued leadership in chip manufacturing.

Eh I'll allow it.

[Anonymous Coward]

We do it here in Amerika too. No pearl clutching needed over this.

I am predicting

[wakeboarder]

a slew of articles in every country with fab worries in about 5-8 years talking about chip fab boondoggles and wasted government spending. I also predict many fabs that never produce chips.

Re:

[timeOday]

I agree, although that doesn't mean it was unnecessary. Globalization was/is more economically efficient, and rolling it back (even partially) will be costly. But getting rug-pulled could be even worse.

Way to go USA!

[jenningsthecat]

Pissing off companies like TSMC before you managed to bring advanced fabs online in your own country was probably not a very bright idea. In addition to making it harder and/or more expensive to acquire the chips you need, you also may have sabotaged your own efforts to get back in the game.

Having Taiwanese and Korean fabs in the US would grow the talent pool faster, and the inevitable cross-pollination would help to move US fab capabilities to the bleeding edge sooner. Those things are far less likely now

Domestic

[Shaitan]

This is a fine example of the difference between giving these subsidies to entrenched and startup domestic companies. Infrastructure spending should always go domestic and not to domestic companies that just turn around and import everything from our enemies (solar, wind, etc).

At the end of the day these companies will silo things so that the US workers in the fabs don't actually understand how the machines and process works just how to operate pre-existing machines. Having table saws is great but we need t