 |
| A manufacturing plant of Samsung Electronics in Pyeongtaek, Gyeonggi Province. Korea Times file |
By Lee Kyung-min
The competitive edge of the local chip industry will fall behind its global peers, as stunted by the blind push of the Democratic Party of Korea (DPK) against a bill introduced to foster the growth driver industry, according to market watchers, Tuesday. The main opposition party claims the bill is designed only to "cut taxes for the rich."
Further fueling concerns is Korea's weakening standing in the global chip market, as indicated by only three Korean firms making the list of the world's top 100 semiconductor powerhouses by market cap. They are Samsung Electronics, SK hynix and SK square.
The bill, the K-Chips Act, includes ways to increase tax credits for semiconductor facility investments, shorten and simplify the approval process for manufacturing plant construction and make exemptions for government-commissioned feasibility studies.
Upon passage, the tax credit of around 6 percent will be increased to as high as 20 percent. This in turn can help local chipmakers make greater investments in research and development, leading to higher job growth and creating added value for the economy, market watchers say.
Korea Economic Research Institute (KERI), a private think tank, said in an Oct. 11 report that a corporate tax cut of 3.3 percent would translate to a 3.89 percent reduction in capital costs and an increase of over 49 trillion won ($35 billion won) in private investments. Korea's gross domestic product (GDP) will, it added, subsequently grow 2.1 percent next year and sustain the country's average growth rate of 1.4 percent over the next decade.
Semiconductor nationalism
"Global chipmakers are witnessing semiconductor nationalism," said Kim Yang-paeng, a semiconductor expert and senior researcher at Korea Institute for Industrial Economics & Trade (KIET).
The semiconductor industries in the U.S., Japan and Taiwan, also members of the Chip 4, a U.S.-established chip alliance, are growing rapidly, with the full backing of their respective governments, he said, a policy priority Korea currently lacks.
"Manufacturers cannot operate plants without basic key infrastructure including roads, power and water supply, areas where only the government can help," he said.
The criticism that the large conglomerates are being granted special treatment, in his view, will become about whether Korea can make it at all, a concern more fundamental and devastating to the export-reliant economy, about a fifth of which is underpinned by semiconductor exports.
"Once Korea loses its standing in the global market, local firms will be rapidly eclipsed by global advanced peers, and so will their small partner firms. The country's economic growth prospect being significantly undermined in the process is not that far-fetched of a scenario," the researcher said.
Korea's corporate tax rate of 26.9 percent as of last year, he added, is markedly high compared to those of the U.S. (13 percent) and Taiwan (12.1 percent).
"Korea is known for militant labor unions, the chief cause of low overall productivity. Greater policy assistance including tax benefits will allow firms to increase R&D spending," Kim said.
![[INTERVIEW] Hip-hop group Uptown returns after 13 years with new lineup](https://img.koreatimes.co.kr/upload/thumbnailV2/0eae35da5e9c40c38cf439e550a2eb3e.jpg/dims/resize/178/optimize)
![[INTERVIEW] ASTRO members aim to shine in musical theater](https://img.koreatimes.co.kr/upload/thumbnailV2/df16760dc50f469d93434f66a069465c.jpg/dims/resize/178/optimize)
