Korean Economy News
Korea pledges $5 bn funding to groom local supply chain for chip industry

Lim Sung-hyun and Lee Eun-joo

The South Korean government on Wednesday pledged 6 trillion won ($5.1 billion) funding to promote and build up the value chain for IT components to accelerate localization of base materials for chips and displays after Japan took retaliatory action with its exports of key materials.

The Ministry of Trade, Industry and Energy on Wednesday announced detailed investment plans for materials, component and equipment industry as part of the so-called “manufacturing renaissance” vision announced jointly with the Ministry of Science and ICT last month. The vision was unveiled by President Moon Jae-in in June with hopes to revive the country’s sagging manufacturing industries. Currently, related ministries have conducted or are in the process of conducting preliminary feasibility tests by each sector.

The industry ministry said that the project involving 1 trillion won investment in chip materials, component, and equipment over 10 years from 2020 has already passed the preliminary study, while the project involving 5 trillion won investment in general materials, components, and equipment over six years from 2021 is under review.

In particular, the industry ministry will spend 520 billion won over 7 years and science ministry 480 billion won over 10 years in the development of chip materials, components, and equipment whose dependency on Japanese imports has been high.

The investment is part of Korea’s efforts to narrow the technology gap with Japan in the chip material sector, after the neighboring country on Monday said it will tighten rules on exports of three key materials used for chip and display production, in an apparent economic retaliation after the Korean Supreme Court ordered companies to compensate Koreans for wartime forced labor.

Japanese companies have been supplying the three semiconductor-related materials to Korean companies like Samsung Electronics Co. and SK Hynix Inc. based on simplified export procedure, which will no longer be possible from July 4.

A separate meeting of ruling Democratic Party, the government, and Blue House vowed to accelerate the localization in materials sector by funding 1 trillion won every year in chip materials, components, and equipment development.

Trade minister Sung Yun-mo said that the government will spend 1 trillion won every year in the related sector to improve competitiveness of local production, diversify imports, and develop essential chip materials.

The industry ministry plans to announce more details on boosting the country’s competitiveness in component materials sector this month.

Under the vision unveiled last month, the industry ministry will help revitalize Korea’s manufacturing industries from new growth sectors to materials, components, and equipment industries to make the country become the world’s fourth-largest manufacturing powerhouse by 2030.

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