[Newsmaker] Chip supremacy gives South Korea more geopolitical freedom: lawmaker

Rep. Yang Hyang-ja, head of the ruling People Power Party's special committee on semiconductors, speaks to The Korea Herald at her office in Yeouido, central Seoul, on Dec. 29. (Im Se-jun/The Korea Herald)

Rep. Yang Hyang-ja, a former executive at Samsung Electronics’ semiconductor business division, called securing a competitive edge in chips a “matter of life and death” amid the ever-evolving geopolitical landscape and an escalating US-China rivalry.

“The winner of the global chip battle will control the economic security order, while the loser will end up becoming a technological colony,” Yang, who heads the ruling People Power Party’s special panel on chips, said in a recent interview with The Korea Herald.

“As the US-China rivalry intensifies, Korea should safeguard its chip supremacy in global markets.”

Yang proposed the so-called “Korean Chips Act,” which mimics a similar bill signed by US President Joe Biden to boost the country’s semiconductor industry at a time when chips are increasingly being seen as security assets rather than industrial commodities.

A close-up view of microchip (123rf)

After months of stalled talks at the National Assembly, the Korean bill was approved by a bipartisan majority late last year. But its effectiveness is being questioned as it fell short of offering drastic tax cuts to chipmakers. Lawmakers agreed to raise the tax deduction rate from the current 6 percent to 8 percent for facility investments made by big companies such as Samsung Electronics and SK hynix, the world’s top two memory chipmakers.

Yang called for at least a double-digit tax break for chipmakers in her original proposal, but opposition lawmakers resisted doing so, citing unfavorable public sentiment about offering special favors to specific chaebol groups.

“If the unfavorable business conditions continue at home, an exodus of high-tech companies and their skilled workers will accelerate,” she said.

A graphic image of microprocessor manufacturing in the US (123rf)

The US, equipped with a $52.7 billion subsidy package for chip production and research in addition to a 25 percent tax credit for facility investment, has already attracted some 300 trillion won ($238 billion) from Korean semiconductor companies. Taiwan, home to the world’s top foundry operator and Samsung’s archrival TSMC, is considering raising tax breaks from the current 15 percent to 25 percent, while Japan plans to offer 476 billion yen ($3.6 billion) in subsidies to attract a TSMC plant into the country.

The independent lawmaker stressed that government support is crucial to nurture a competitive chip industry, and urged the government to revise the bill and raise the tax deduction rate.

Amid growing criticism over the “half-baked” chips act, President Yoon Suk-yeol on Friday ordered ministries to come up with additional subsidy measures to support chipmakers.

"When President Yoon took office in May, he pledged 20 percent tax breaks, highlighting the importance of fostering the semiconductors industry. ... He frequently stresses the value of freedom. I think that freedom comes from our technological supremacy,” Yang said.

Yang added that the government should set up a control tower to oversee the nation’s chip industry and design a long-term blueprint, saying one of the key strengths of Samsung is its detailed short- and long-term planning, including the operation of human resources.

Yang entered Samsung in 1985 as an assistant researcher at the company's then-nascent memory chip business division. She left the company as a vice president in 2014 to seek a political career. She was elected as a lawmaker of Democratic Party of Korea in 2020. She has been an independent lawmaker since 2021.

Last month, Yang, together with her former boss, then Samsung Electronics’ Chief Technology Officer Lim Hyung-kyu, published a book titled “Hidden Heroes” which sheds light on Korea’s emergence as a chip powerhouse.

By Jie Ye-eun (yeeun@heraldcorp.com)