South Korea’s government is planning to raise tax breaks up to 35 percent for chip companies’ capital expenditure in a chip spending race with US and Taiwan.
President Yoon Suk Yeol called for bigger incentives than the 8 and 16 percent tax incentives originally proposed for larger and smaller companies, respectively, set out in a bill that is about to go before legislators.
Under the proposed amendment big companies will get a tax credit of 15 percent on investments in manufacturing facilities and small companies will get a tax credit of 25 percents. Any additional investments proposed for chip-making in 2023 will get an additional 10 percent tax break, according to reports.
There are concerns that South Korea’s chip giants Samsung Electronics and SK Hynix need extra support to handle competition in the global semiconductor industry. The US applies a 25-percent tax credit on chip facility investments.
Many regions of the world – including China, the US and Europe – have initiated tax-payer funded incentive schemes to stimulate the creation of domestic supply chains for semiconductors.
The enlarged budget for the plan could save companies more than 3.6 trillion won (US$2.8 billion). However, it is uncertain that the revised bill will gain the necessary support from the opposition party at the national assembly.