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[Editorial] Chip policy beyond elections

Korea required to strengthen semiconductor sector amid intensifying global competition

By Korea Herald

Published : April 11, 2024 - 05:31

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Unlike in previous elections, a single industrial sector has drawn keen attention among major parties and voters in the run-up to the April 10 general election. The sector in question is none other than the country’s crucial semiconductors industry, which accounts for about 20 percent of the country's exports.

What’s more, the chips industry is expected to take center stage among policymakers regarding legislative efforts and policy support, even after the general election has concluded Wednesday, as the sector can have a great impact on a wide range of related industries and the country’s future growth.

The growing importance of the chips industry partly explains why President Yoon Suk Yeol unveiled a new set of massive spending plans for the sector through the AI Chip Initiative on Tuesday -- one day ahead of the elections, intriguing timing for highlighting his policy focus on semiconductors.

It remains to be seen whether Yoon’s move has any real impact on voters. What’s certain is that the AI Chip Initiative is designed to accentuate -- or at least publicize -- the government’s policy aimed at bolstering the domestic chip industry and accelerating the deployment of artificial intelligence-empowered technology.

Under the initiative, Seoul will spend 9.4 trillion won ($6.94 billion) on AI chips by 2027, while forming a new fund of 1.4 trillion won to nurture companies spearheading innovative AI chip technologies.

The AI Chip Initiative has a lofty goal of helping Korea grab a 10 percent share of the world's processing chip market by 2030 and making it one of the world's top three countries in AI.

"The semiconductor race is both an industrial war and a total war among countries," Yoon said. “We will have a full response system that is comparable to that of a wartime situation.”

Yoon’s rhetoric may sound a bit exaggerated, but the country’s renewed commitment is based on the fast-evolving global chip competition. It is also notable that Tuesday’s announcement came not long after a massive chip support initiative was announced. In January, Yoon unveiled a plan to form a massive semiconductor chip cluster in southern Gyeonggi Province, which is projected to draw combined investments of 622 trillion won for facilities and create 3 million jobs over the next 20 years.

During the campaign period, the ruling People Power Party and the main opposition Democratic Party of Korea staged fierce battles for the 17 seats of the “semiconductor belt” in Gyeonggi Province -- the electoral districts to collectively host one of the world’s biggest chip clusters in the future.

Yoon’s AI Chip Initiative and the general election also followed the US government’s announcement Monday that it would award Taiwan Semiconductor Manufacturing Co. some $11.6 billion in grants and loans to help the leading chipmaker build three fabrication plants in Arizona. The US is currently pulling out all stops to boost its domestic chip manufacturing under the CHIPS and Science Act.

Samsung Electronics is set to receive between $6 billion and $7 billion in grants from the US government next week in connection with its plan to build chip facilities in Taylor, Texas, according to a report from Reuters.

The global chip industry is also going through fresh changes. On April 5, the US and EU announced they may take joint steps for the distortion of supply chains by legacy semiconductors. China currently dominates the global market of legacy chips, which are used in cars, airplanes, electronic appliances and other devices. Experts view the latest step by the US and EU as a fresh round in the global chip competition.

Now that the election to fill the National Assembly is over, the government and lawmakers have to draw up more proactive policy measures regarding the heightened chip race, a development that calls on Korea to play a balancing act and cultivate a viable chip strategy.