Big companies will get a tax credit of 15 percent on
investments on manufacturing facilities, up from the planned 8 percent under
legislation passed last month, according to a finance ministry statement.
Smaller companies' capex spending will get a tax break of 25 percent, up from
16 percent. Any additional investment in chipmaking in 2023 will get another 10
percent tax break, the ministry said. The broadened plan, which will be
proposed this month, could reduce the tax burden on companies by more than $2.8
billion.
Home to leading memory chipmakers Samsung and SK Hynix,
Korea has been caught between the US and China in an escalating fight over
semiconductors, which control key technologies from artificial intelligence to
missile defenses.
It's unusual for an administration to propose substantive
changes so soon after lawmakers pass a bill. Yoon ordered his government just
last week to devise stronger incentives to drive its chip industry, accusing
opposition lawmakers of impeding that critical effort as other countries spend
billions on semiconductor policy support.
It's uncertain whether the revised bill will gain the necessary
support of the majority-wielding opposition party at the national assembly.
Opponents argue that such incentives endanger government finances and would
only benefit big firms.
In a strongly worded statement, Yoon blasted a bill passed
on December 23 with a smaller-than-envisioned tax cut for corporates. It called
for a tax break of 8 percent for big companies, falling shy of the 20 percent
that a special committee of experts had previously recommended.
US, China and Japan are pouring billions into building up
their own chip supply chains, as more countries embrace tech protectionism
after pandemic-driven logistics snarls highlighted countries' dependence on one
another for key electronic components.
US sanctions on advanced chip technology exports bound for
China are putting increased pressure on Korea to choose between the US, its
security ally, and China, its biggest trade partner. Both have asked South
Korea to expand chip production partnerships, and Yoon's ruling party has
formed a 13-member special committee to brainstorm a solution.