South Korea’s Yoon pledges to extend tax benefits for chip investments

South Korean President Yoon Suk Yeol said on Monday that he would extend tax credits on investments in the domestic semiconductor industry to boost employment and attract more talent.

The country, home to the world’s top memory chipmakers Samsung Electronics and SK Hynix, aims to expand tax breaks and support to raise the competitiveness of high-tech sectors including those involving chips, displays and batteries.

“When I talk to heads of state, what I talk about most about South Korea is BTS and semiconductors,” Yoon told a meeting with chip industry officials and students, referring to the K-pop supergroup.

South Korea is also building a mega chip cluster in Yongin, south of Seoul, touted as the world’s largest high-tech chipmaking complex to attract chip equipment and fabless companies.

Yoon said he expected a total initial investment of about 622 trillion won ($470.82 billion) in the cluster and the creation of at least 3 million jobs over 20 years, adding that the government would pour in every possible resource to win a “war” in chips.

In January 2023, the government unveiled a plan to offer large tax breaks to semiconductor companies investing at home, which are set to end this year.

“Tax deduction for semiconductor investments is supposed to expire this year, but we will extend the effect of the law to continue with investment tax deduction,” Yoon said.

Rebutting claims that such tax credits give preferential treatment to large conglomerates, Yoon said increased investments in chips will lead to more jobs and more state tax income in the long term.

South Korean tech giant Samsung Electronics has said it expects to invest $230 billion in the period through to 2042 to develop the country’s chipmaking base.