south korea boosts chip industry with new tax breaks
Seoul, Friday, 28 February 2025.
south korea’s national assembly has approved the ‘chip act’, increasing tax credit rates for semiconductor companies. samsung could see significant benefits alongside boosted competitiveness against tsmc. large firms can expect tax credit increases from 15% to 20%, and smaller companies will see credits rise from 25% to 30%. the act also extends tax incentives for r&d in strategic technologies until 2029 and semiconductor r&d until 2031, securing long-term support for the sector.
Tax credit specifics
The ‘Chip Act’ aims to incentivize semiconductor companies to invest more in facilities and equipment [1][4]. Large and mid-sized companies will see their tax credit rate increase from 15% to 20% [1][4][5]. Small and medium-sized enterprises (SMEs) will benefit from an even larger increase, with their tax credit rate rising from 25% to 30% [1][4][5]. These changes are designed to lower investment costs and encourage more capital flow into the semiconductor industry [5].
extended r&d support
Beyond facility investment, the legislation extends tax benefits for research and development [2][5]. R&D tax credits for emerging, original, and national strategic technologies are extended to the end of 2029 [1][2][5]. Tax credits for semiconductor R&D are extended until the end of 2031 [1][2][5]. The act also incorporates R&D equipment investments within the scope of national strategic technology and new growth technology integrated investment tax credits [2]. Areas like artificial intelligence and future transportation are now eligible for these tax incentives as national strategic technologies [2].
market impact and investor considerations
The immediate effect on stock values remains to be seen, but analysts suggest a positive long-term outlook for South Korean semiconductor firms, especially Samsung [1][5]. The increased tax credits could improve profitability and allow for greater investment in capacity expansion and technological advancement [5]. Investors should monitor Samsung’s capital expenditure plans and R&D initiatives to gauge the full impact of the ‘Chip Act’ [GPT]. Furthermore, keep an eye on how competitors like TSMC respond to this enhanced support for the South Korean semiconductor industry [1].
broader economic implications
The ‘Chip Act’ is expected to have implications beyond individual companies [5]. It is designed to strengthen the overall competitiveness of South Korea’s semiconductor industry in the global market [5]. The act complements other measures, such as the Ministry of Trade, Industry and Energy’s efforts to foster cooperation on shipbuilding and address trade barriers with the United States [3]. These coordinated efforts aim to secure South Korea’s position in the global technology landscape [3][5].