Chip Wars: South Korea To Follow The US, Set To Pass Its Own 'Chips Act'

A bill aiming to boost South Korea's semiconductor industry by providing tax incentives to companies is expected to pass in parliament on Thursday (30 March), according to a Bloomberg report.

The "K-Chips Act" is a legislation that will raise the tax credit for large companies investing in manufacturing facilities from 8 per cent to 15 per cent.

The tax break for smaller and medium-sized firms will increase from 16 per cent to 25 per cent.

The move is expected to encourage investment for major technology companies in South Korea, like Samsung Electronics and SK Hynix.

Samsung and Hynix are leading memory chip manufacturers globally. Additionally, Samsung ranks as the second-largest contract maker for logic chips based on market share — behind Taiwan Semiconductor Manufacturing Company.

The bill has received support from both the conservative and progressive political blocs.

South Korea aims to match or surpass Taiwan in making logic chips for other companies through the new parliament bill and government incentives.

South Korea is set to exceed China in spending on advanced chipmaking equipment in 2024.

South Korean chipmakers are facing increased pressure as the Biden administration strives to seek the assistance of global partners in implementing extensive restrictions on the sale of advanced chips equipment to China.

The United States (US) is trying to prevent China from advancing in various cutting-edge technologies, so that they don't pose a challenge to America's dominance in the global arena.

US politicians will allocate $50 billion of federal funds towards supporting the country's production of semiconductors and developing a skilled workforce needed by the industry, through the 2022 Chips and Science Act.