South Korea plans $230 mn fund to boost chip industry

South Korea is set to establish a fund worth 300 billion won ($229.25 million) in order to ensure a stable value chain for the chip industry.
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The Ministry of Trade, Industry and Energy announced on Monday that the fund will focus on strengthening the logic chip sector, as well as supporting related materials, parts, and components firms.

Major companies such as Samsung Electronics and SK Hynix have pledged a combined investment of 75 billion won, while the Korea Development Bank, the Industrial Bank of Korea, and other entities will provide an additional 75 billion won in policy financing for a parent fund. The remaining 150 billion won will come from private investors. The launch of this large-scale fund for the semiconductor industry is expected to take place within this year, Yonhap news agency reported.

The primary objective of the fund is to support fabless companies and those involved in producing materials, components, and equipment for the chip industry. These companies are currently facing difficulties in raising funds due to the industry’s downturn and recent interest rate hikes, according to the ministry.

In 2017, South Korea introduced a 240 billion-won fund to stimulate industry growth, followed by a separate 120 billion-won fund in 2020. Both of these funds are expected to be depleted by next year.

First Vice Industry Minister Jang Young-jin expressed his expectations for the fund, stating, “This fund is expected to help create a South Korean version of Nvidia that will lead the country’s chip industry. The government will continue to implement various supportive measures.”

The semiconductor industry plays a crucial role in South Korea’s economy, and the government has committed to providing comprehensive support by relaxing regulations, offering increased investment incentives, and fostering talent. Earlier this year, the National Assembly passed a revision of the Act on Restriction of Special Taxation, known as the K-Chips Act, which includes expanding the tax credit rate for chipmakers.