Korea passes tax break-driven 'Chips Act' as protectionism fears mount
(2023/03/30)
- Reference: 1680200827
- News link: https://www.theregister.co.uk/2023/03/30/korea_passes_its_own_chips/
- Source link:
South Korea has passed legislation giving tax breaks to its semiconductor companies in a bill being labelled as the "Korean Chips Act." At the same time, the nation's trade minister repeated its complaints that the criteria for Korean companies to access US funding are unpalatable in a possible sign of growing protectionism in the worldwide chip market.
To bump up the level of tax breaks, the Korean National Assembly passed a revision bill to the Restriction of Special Taxation Act. The reductions will be given to companies investing in semiconductor production and other strategic industries in the country.
These tax breaks appear to be largely in line with [1]earlier reports regarding the Korean government’s plans, and will see large corporations such as Samsung Electronics and SK hynix offered tax credits of up to 15 percent on investments into strategic technologies such as semiconductor manufacturing, up from 8 percent previously.
[2]
Raising the deduction rate from 8 percent to 15 percent would save some 2.5 trillion won ($1.9 billion) in taxes for the local chip industry, according to [3]The Korea Herald .
[4]
[5]
For small and medium-sized enterprises, the tax credit rate is set to be raised from 16 percent to 25 percent, in moves designed to bolster domestic investment in key technology sectors.
The move follows the announcement of plans from the Korean government earlier this month to pour cash into several key industries including semiconductors and electric vehicles. As part of those plans, [6]Samsung said it aimed to invest $230 billion over the next 20 years to build five new local semiconductor plants.
[7]
South Korea is not the only nation offering such tax breaks. In January, Taiwan – home to semiconductor giant TSMC – [8]passed similar legislation that will allow its domestic chipmakers to turn up to 25 percent of their annual research and development expenses into tax credits, in efforts to ensure the country's continued leadership in chip manufacturing.
The US also [9]passed its CHIPS Act last year, authorizing $52 billion in funding to revitalize semiconductor manufacturing within its borders, while the EU is moving ahead at its own pace with the [10]European Chips Act to unlock €43 billion ($46 billion) to build up capacity and innovation to reduce European reliance on chips supplies from elsewhere.
The danger is that all of this could turn into a subsidy race between nations and regions, a danger judged to be real enough to be among the topics discussed in meetings of the [11]EU-US Trade and Technology Council (TTC), formed to coordinate approaches to global trade, economic, and technology issues between the two.
You can't really rely on the global electronics supply chain anymore
It could also be a sign of growing protectionism in the global chip industry. While US CHIPS Act funding is theoretically open to companies from other countries, Korea’s SK hynix [12]has complained that the process is too onerous, and the country’s trade minister warned that it comes with strings attached, requiring detailed disclosure of key technical and financial information.
Taiwan's TSMC expressed similar concerns, with a spokesperson for the company saying: “There are some conditions that cannot be accepted,” according to [13]Reuters .
[14]
Gartner vice president for semiconductors and electronics Richard Gordon told us that he didn’t believe that the new chip subsidies should be seen as protectionism in the traditional sense.
“It’s more about creating an attractive investment environment to compete globally and working towards more national self-sufficiency in key technology supply chains,” he told us.
“But, yes, we are entering a new environment where governments are realizing that they must pay attention to developing policies in these areas rather than relying on the global electronics supply chain to provide a solution,” Gordon added.
[15]SK hynix CEO says CHIPS Act red tape is too sticky to bother
[16]US bans good for Chinese chipmakers, and bad for us, says Taiwanese rival
[17]Barred from US tech, Huawei claims to have built its own 14nm chip design suite
[18]Where in the world is Terraform Labs villain Do Kwon? Montenegro, actually
[19]South Korea fines McDonald's for data leak from raw SMB share
IDC Senior Research Director for Europe Andrew Buss agreed, saying “I’d view this as perhaps a bit of protectionism, but much more around encouraging large scale capital investment for the building of cutting edge fabs in the region, to enable a lot more self-sufficiency in the country’s semiconductor and technology industries.”
Earlier this month, retired TSMC founder Morris Chang warned that [20]globalization had effectively ended for the chip industry, because US efforts to contain China were leading to a split in the global supply chain.
"There's no question in my mind that, in the chip sector, globalization is dead. Free trade is not quite that dead, but it's in danger," Chang said. ®
Get our [21]Tech Resources
[1] https://www.theregister.com/2023/01/03/korea_chip_tax_breaks/
[2] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/systems&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2ZCYGhEt9CyeM2TkYpUyLqAAAANg&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[3] http://www.koreaherald.com/view.php?ud=20230330000782
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/systems&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZCYGhEt9CyeM2TkYpUyLqAAAANg&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/systems&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZCYGhEt9CyeM2TkYpUyLqAAAANg&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[6] https://www.theregister.com/2023/03/15/samsung_230b_chip_plants/
[7] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/systems&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZCYGhEt9CyeM2TkYpUyLqAAAANg&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[8] https://www.theregister.com/2023/01/09/taiwan_chip_tax_credits/
[9] https://www.theregister.com/2022/08/09/biden_signs_chips_act/
[10] https://www.theregister.com/2023/02/16/eu_chips_act_bills/
[11] https://www.theregister.com/2022/05/16/ttc_paris_meeting/
[12] https://www.theregister.com/2023/03/30/sk_hynix_chips_act_criticism/
[13] https://www.reuters.com/technology/us-chip-subsidy-criteria-could-be-burden-says-south-korea-2023-03-30/
[14] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/systems&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZCYGhEt9CyeM2TkYpUyLqAAAANg&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[15] https://www.theregister.com/2023/03/30/sk_hynix_chips_act_criticism/
[16] https://www.theregister.com/2023/03/29/us_bans_mediatek/
[17] https://www.theregister.com/2023/03/24/huawei_eda_14nm_chips/
[18] https://www.theregister.com/2023/03/24/do_kwon_montenegro/
[19] https://www.theregister.com/2023/03/23/south_korea_privacy_fines_mcdonalds/
[20] https://www.theregister.com/2023/03/16/globalization_morris_chang_tsmc/
[21] https://whitepapers.theregister.com/
To bump up the level of tax breaks, the Korean National Assembly passed a revision bill to the Restriction of Special Taxation Act. The reductions will be given to companies investing in semiconductor production and other strategic industries in the country.
These tax breaks appear to be largely in line with [1]earlier reports regarding the Korean government’s plans, and will see large corporations such as Samsung Electronics and SK hynix offered tax credits of up to 15 percent on investments into strategic technologies such as semiconductor manufacturing, up from 8 percent previously.
[2]
Raising the deduction rate from 8 percent to 15 percent would save some 2.5 trillion won ($1.9 billion) in taxes for the local chip industry, according to [3]The Korea Herald .
[4]
[5]
For small and medium-sized enterprises, the tax credit rate is set to be raised from 16 percent to 25 percent, in moves designed to bolster domestic investment in key technology sectors.
The move follows the announcement of plans from the Korean government earlier this month to pour cash into several key industries including semiconductors and electric vehicles. As part of those plans, [6]Samsung said it aimed to invest $230 billion over the next 20 years to build five new local semiconductor plants.
[7]
South Korea is not the only nation offering such tax breaks. In January, Taiwan – home to semiconductor giant TSMC – [8]passed similar legislation that will allow its domestic chipmakers to turn up to 25 percent of their annual research and development expenses into tax credits, in efforts to ensure the country's continued leadership in chip manufacturing.
The US also [9]passed its CHIPS Act last year, authorizing $52 billion in funding to revitalize semiconductor manufacturing within its borders, while the EU is moving ahead at its own pace with the [10]European Chips Act to unlock €43 billion ($46 billion) to build up capacity and innovation to reduce European reliance on chips supplies from elsewhere.
The danger is that all of this could turn into a subsidy race between nations and regions, a danger judged to be real enough to be among the topics discussed in meetings of the [11]EU-US Trade and Technology Council (TTC), formed to coordinate approaches to global trade, economic, and technology issues between the two.
You can't really rely on the global electronics supply chain anymore
It could also be a sign of growing protectionism in the global chip industry. While US CHIPS Act funding is theoretically open to companies from other countries, Korea’s SK hynix [12]has complained that the process is too onerous, and the country’s trade minister warned that it comes with strings attached, requiring detailed disclosure of key technical and financial information.
Taiwan's TSMC expressed similar concerns, with a spokesperson for the company saying: “There are some conditions that cannot be accepted,” according to [13]Reuters .
[14]
Gartner vice president for semiconductors and electronics Richard Gordon told us that he didn’t believe that the new chip subsidies should be seen as protectionism in the traditional sense.
“It’s more about creating an attractive investment environment to compete globally and working towards more national self-sufficiency in key technology supply chains,” he told us.
“But, yes, we are entering a new environment where governments are realizing that they must pay attention to developing policies in these areas rather than relying on the global electronics supply chain to provide a solution,” Gordon added.
[15]SK hynix CEO says CHIPS Act red tape is too sticky to bother
[16]US bans good for Chinese chipmakers, and bad for us, says Taiwanese rival
[17]Barred from US tech, Huawei claims to have built its own 14nm chip design suite
[18]Where in the world is Terraform Labs villain Do Kwon? Montenegro, actually
[19]South Korea fines McDonald's for data leak from raw SMB share
IDC Senior Research Director for Europe Andrew Buss agreed, saying “I’d view this as perhaps a bit of protectionism, but much more around encouraging large scale capital investment for the building of cutting edge fabs in the region, to enable a lot more self-sufficiency in the country’s semiconductor and technology industries.”
Earlier this month, retired TSMC founder Morris Chang warned that [20]globalization had effectively ended for the chip industry, because US efforts to contain China were leading to a split in the global supply chain.
"There's no question in my mind that, in the chip sector, globalization is dead. Free trade is not quite that dead, but it's in danger," Chang said. ®
Get our [21]Tech Resources
[1] https://www.theregister.com/2023/01/03/korea_chip_tax_breaks/
[2] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/systems&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2ZCYGhEt9CyeM2TkYpUyLqAAAANg&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[3] http://www.koreaherald.com/view.php?ud=20230330000782
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/systems&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZCYGhEt9CyeM2TkYpUyLqAAAANg&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/systems&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZCYGhEt9CyeM2TkYpUyLqAAAANg&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[6] https://www.theregister.com/2023/03/15/samsung_230b_chip_plants/
[7] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/systems&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZCYGhEt9CyeM2TkYpUyLqAAAANg&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[8] https://www.theregister.com/2023/01/09/taiwan_chip_tax_credits/
[9] https://www.theregister.com/2022/08/09/biden_signs_chips_act/
[10] https://www.theregister.com/2023/02/16/eu_chips_act_bills/
[11] https://www.theregister.com/2022/05/16/ttc_paris_meeting/
[12] https://www.theregister.com/2023/03/30/sk_hynix_chips_act_criticism/
[13] https://www.reuters.com/technology/us-chip-subsidy-criteria-could-be-burden-says-south-korea-2023-03-30/
[14] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/systems&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZCYGhEt9CyeM2TkYpUyLqAAAANg&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[15] https://www.theregister.com/2023/03/30/sk_hynix_chips_act_criticism/
[16] https://www.theregister.com/2023/03/29/us_bans_mediatek/
[17] https://www.theregister.com/2023/03/24/huawei_eda_14nm_chips/
[18] https://www.theregister.com/2023/03/24/do_kwon_montenegro/
[19] https://www.theregister.com/2023/03/23/south_korea_privacy_fines_mcdonalds/
[20] https://www.theregister.com/2023/03/16/globalization_morris_chang_tsmc/
[21] https://whitepapers.theregister.com/
From globalisation to tribalisation in a trillion dollars of MMT.
Tron
Seoul is aiming for a second 'Miracle on the Han River' driven by the tech chaebols. SK is fairly protectionist as it is. Check out Naver. It helps to have your own language to geoblock tech. Japan does this too, but not as restrictively. Both SK and JP are in a tricky position. They were big winners of a globalised society, trading with the West and China. If the US bans them from trade with China and Chinese allies, they are going to feel the pinch big time, as isolated vassal states of Uncle Sam. Losing Chinese trade would be as bad for them as Brexit has been for the UK, relegating their economies.
Doing everything in your own backyard is hugely wasteful in terms of cash and resources, so the impact on the environment will be considerable. As governments are putting geopolitics before the environment, I guess climate change isn't that serious an issue after all. Global standards will go, so interoperability across borders will end and digital borders will match physical ones.
The UK is pretty much skint thanks to Brexit and doesn't have a lot to subsidise. We are now likely to be spectators in all this. Once the UKG roll out their own British standards, you're choice of tech will be drastically limited. You may be amazed at how fast things go down hill.
Panda in the room
I wonder how these unpalatable conditions compare with doing business in China? I bet there is no requirement for you to partner with a US company to do business in the USA, unlike China.
South Korea and Taiwan has for years offered tax break to it's technology sector the US is only playing catch-up to them in levelling the playing field a bit.