(Bloomberg) — South Korea will begin providing aid to chipmakers starting in July, kicking off a 26 trillion won ($19 billion) financial support package promised to boost a critical industry.
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Seoul will start with an 18 billion won package of measures, including preferential loans and investment capital. Starting next month, eligible companies will be able to avail themselves of a 17 billion won loan program at the lowest interest rates on the market, the Ministry of Finance said in a statement released on Wednesday. The government will also help create two funds totaling 1.1 trillion won, the smaller of which will pool 300 billion won by 2025 and begin investing in local manufacturers of chipmaking equipment and materials next month.
Korea joins countries from the US to China that are channeling government aid into a strategic arena, especially as geopolitical tensions fragment the global chip supply chain. Technology from Samsung Electronics Co. and SK Hynix Inc. helps make South Korea the world’s largest maker of memory chips. The government is now investing $470 billion to build a semiconductor “megacluster” outside Seoul that will serve as the heart of its chip industry.
Seoul’s aid package comes as the U.S. pressures allies to restrict China’s access to semiconductor technology. American officials want South Korea to restrict the flow of equipment and technologies to make high-end logic and memory chips to China, Bloomberg News reported.
To support the overall plan, the government will extend tax incentives to eligible companies for a further three years. It is also considering expanding the scope of beneficiaries to include manufacturers of chip materials, parts and equipment.
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