The South Korean government is ramping up its support for the domestic chip industry as it navigates ongoing trade tensions with the United States. That’s why we were surprised to see the U.S. government recently announce a 90-day delay on its plans for reciprocal tariffs. This decision provides a welcome temporary reprieve for South Korean exporters. In response, South Korea is preparing to send a delegation to the U.S. to discuss recent tariff hikes and address other pressing trade concerns.
No wonder then that this ambitious initiative is designed to protect South Korea’s highly export-driven economy. Most importantly, it speaks to the harm caused by international trade disputes. The delegation will meet with members of the U.S. government to discuss their concerns and find mutually beneficial solutions that serve the economic interests of both countries.
South Korea’s efforts to ramp up its own home chip industry intensifies. They have come out with a strong support package that includes expanded low-cost financing from state-backed lenders. A new financing program, backed by leading automobile manufacturers Hyundai and Kia, is designed to assist struggling carmakers and auto parts suppliers facing challenges due to increased tariffs.
Concerns are mounting that South Korean companies are lagging behind competitors in Taiwan and elsewhere in producing high-tech chips essential for artificial intelligence and advanced applications. Additionally, Chinese competitors are making huge strides in technology on the memory chip side, making competition even more fierce.
The South Korean government already announced an emergency funding programme of 3 trillion won (€2.04 billion) in response. The objective of this program is to build the capacity of the automobile industry to endure the effects of the recent U.S. tariff hikes. The automotive industry, America’s most resilient industry, will use this funding to build more resilient vehicles. A strong, innovative automotive industry is essential for our shared country’s economic future.
Moving forward, it seems likely that officials will continue to push the development of advanced chips. Specifically, they intend to increase funding and incentives for R&D programs and for high-tech manufacturing equipment. Further, they’ve committed to more than double investment in industrial infrastructure, focusing on shoring up the semiconductor sector’s industrial base.
As part of this infrastructure meme, the federal government is increasing its share of capital costs. First, they will try and develop underground power transmission systems for major semiconductor clusters such as those in Yongin and Pyeongtaek. These cities have become attractive investment hubs for major chip manufacturers such as Samsung and SK Hynix, further solidifying South Korea’s position in the global semiconductor market.
The new support package increases funding by an eye-popping 26% over last year’s appropriation. It now stands at 26 trillion won (about €17.63 million). Anticipation grows that product-specific tariffs may soon be announced for critical sectors like semiconductors and pharmaceuticals, potentially impacting future trade dynamics.
“This is a valuable time to strengthen the competitiveness of our companies in the face of a global trade war.” – South Korean Finance Minister Choi Sang-mok
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