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The Korea Herald
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THE INVESTOR
June 24, 2024

Economy

Minister says chip subsidy a ‘tall order’

  • PUBLISHED :May 09, 2024 - 09:34
  • UPDATED :May 09, 2024 - 09:34
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South Korea's minister of trade, industry and energy speaks during a meeting with government and industry officials in Seoul on Wednesday. (Yonhap)

Countries have been rolling out competitive subsidy programs to boost their edge in the critical semiconductor industry.

For South Korea, it is difficult to come up with such direct support programs, but the government is working to create an environment to benefit long-term investment in the sector, Industry Minister Ahn Duk-geun said in a press briefing Tuesday.

Ahn also explained that the ministry, along with other government entities will set up a public fund to support strategic industries, including semiconductors.

"It is difficult to come up with a direct subsidy program. Giving out subsidies (for one industry) is risky, and lawmakers also face similar difficulties at the National Assembly," Ahn said.

"Instead of offering loans, we seek to create an environment favorable for long-term investment. We are currently in discussions with related government entities including the Finance Ministry to set up a fund to foster advanced technologies including chips, secondary batteries, biopharmaceuticals and displays.

Chip subsidy programs are widespread among chip powerhouses, but Korea, home to the world’s two largest memory chipmakers Samsung Electronics and SK hynix, faces opposition that it is unfair to offer large subsidies to one single industry.

Instead of providing direct funding, government support in Korea leans more towards granting permits for smooth operation and loosening regulations, the official explained.

During the press briefing, the industry minister underscored that trade is the answer to boost the country's stagnant growth rate, and said he will work to achieve the goal of $700 billion in exports this year.

"One of the reasons behind our push to increase export was because we could not find other driving factors to boost the economic growth in the domestic economy," Ahn said.

"Our goal is to raise the growth rate by 0.5 percentage point to achieve growth in the late-2 percent, and personally, 3 percent." South Korea's economy has been predicted to grow 2.3 percent by the Organization for Economic Cooperation and Development this year.

"The president said he will become Korea's No. 1 salesman (for boosting trade). I will be Korea's No. 1 helmsman (in support)," Ahn said, adding that the ministry will announce the country's trade strategy soon.

He also highlighted the importance of adopting artificial intelligence technology to maintain the manufacturing industry, which is the pillar of the country's economy.

The Industry Ministry on Wednesday announced the country's "AI autonomous manufacturing strategy 1.0," aimed at introducing AI-based robots and equipment in manufacturing processes. The ministry said it will invest about 1 trillion won ($733 million) over the next five years together with private companies, to increase the AI manufacturing system expansion rate from the current 9 percent to over 30 percent by 2030.

Regarding Korea Hydro & Nuclear Power's bid for a project to construct four nuclear reactors in the Czech Republic, Ahn said South Korea currently holds a competitive edge against France's EDF, for its proven capability. The country has completed the construction of nuclear reactors in the United Arab Emirates.

A final decision is expected to be made around June and July.

Ahn also stressed the need to promote the use of carbon-free renewable sources and nuclear energy amid the growing electricity demand.

"As we cannot fully power cutting-edge industries with renewable sources alone, the country must supplement the supply with nuclear energy," Ahn said. "The government aims to promote a balanced use of both renewable sources and nuclear energy."

The ministry will soon unveil its long-term plan for the energy portfolio, including plans to construct new nuclear plants, later this month.

On the financial challenges the state-run utility companies, Korea Electric Power Corp. and Korea Gas Corp., face, Ahn said the government is "weighing the appropriate timing," to raise utility prices, including gas and electricity soon.

"As the situations in the Middle East remain unstable, we are monitoring the situation while finding the appropriate timing to raise electricity and gas prices," the minister said.

By Jo He-rim (herim@heraldcorp.com)

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