Samsung Electronics to Invest $230 Billion in South Korea Chipmaking Base, Will Set Up 5 Chip Factories

South Korean tech giant Samsung Electronics expects to invest $230 billion (roughly Rs. 18,97,500 crore) over the next 20 years to develop what the country's government called the world's largest chip-making base, in line with efforts to boost the national chip industry.

Samsung's around KRW 300 trillion (roughly Rs. 1,89,86,000 crore) project is part of a KRW 550 trillion (roughly Rs. 34,81,200 crore) private-sector investment plan unveiled by the government on Wednesday. Seoul's strategy aims to expand tax breaks and support to raise competitiveness of high-tech sectors including those involving chips, displays and batteries.

The plans come as other countries introduce steps to bolster domestic chip industries, including the United States which last month released details of its CHIPS Act, offering billions of dollars in subsidies for chipmakers that invest in the country.

"The economic battlefield, which recently began with chips, has expanded ... countries are providing large-scale subsidies and tax support," said President Yoon Suk Yeol on Wednesday.

"(We) must support private investments to ensure further growth ... the government must provide location, R&D, manpower, and tax support."

Samsung's manufacturing additions will include five chip factories and attract up to 150 materials, parts and equipment makers, fabless chipmakers and semiconductor research-and-development organisations near Seoul, the industry ministry said in a statement.

In addition to private-sector investment, the government will budget KRW 25 trillion (roughly Rs. 1,58,200 crore) or more over five years for R&D in strategic technologies such as artificial intelligence. It will provide about KRW 360 billion (roughly Rs. 2,300 crore) to develop chip packaging, and about KRW 100 billion (roughly Rs. 600 crore) in electricity and water infrastructure this year for industrial complexes.

In January, the government proposed raising the tax deduction rate for facility investments in chips and other strategic technologies from 8 percent to 15 percent for large corporations.

Separately, Samsung Electronics, unit Samsung Display, affiliates Samsung SDI and Samsung Electro-Mechanics said they plan to invest KRW 60.1 trillion (roughly Rs. 3,80,300 crore) in the next 10 years in regions outside the Seoul metropolitan area to develop chip packaging, displays and battery technology.

South Korea, home to the world's two biggest memory chip makers, Samsung Electronics and SK Hynix, is seeking to improve supply-chain stability to become a major player in the non-memory chip field, currently dominated by chipmakers such as Taiwan Semiconductor Manufacturing Co and Intel.

© Thomson Reuters 2023