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[Editorial] Chip cluster plan

Yoon’s bold push for chips cluster faces hurdles, engineer shortage

Jan. 18, 2024 - 05:30 By Korea Herald

President Yoon Suk Yeol on Monday announced a plan to form a massive semiconductor chip cluster in southern Gyeonggi Province, which is projected to draw combined investments of 622 trillion won ($471.4 billion) for facilities and provide 3 million jobs over the next 20 years.

The plan, unveiled at Yoon’s public debate event, aims to double the number of chip-producing plants in the region to 37, consolidating them into a vast chip cluster covering cities like Hwaseong, Giheung, Pyeongtaek, Anseong, Yongin, Icheon, Suwon and Pangyo.

The envisioned chip cluster is designed to create greater synergy by helping semiconductor-related companies work together in a single industrial district that combines memory chip manufacturing, foundry services and research.

Korea’s chip cluster plan comes at a time when countries such as the US, China, Japan and Taiwan are investing huge sums of money to stay ahead in the global chip battle.

Yoon’s announcement on the cluster includes 16 new chip plants that will be complete by 2047. In the initial five years of the plan alone, the government expects to invest 158 trillion won in the cluster, creating 950,000 new jobs. Yoon also hinted at extending the expiration of tax incentives for companies investing in chipmaking infrastructure.

Yoon’s chip cluster plan, however, is not an entirely new one. In March last year, he pledged to help build a chip cluster that would attract 300 trillion won in investments through 2043. Monday’s announcement, unsurprisingly, includes Samsung Electronics’ previous investment commitments to build a new foundry plant and memory chip production lines in Yongin and Pyeongtaek, as well as SK hynix’s plan to set up a new memory chip plant in Yongin.

It should be noted that Samsung, SK and their partners will invest their money into the cluster facilities, while the government will play a supporting role by handling tax breaks, infrastructure for electricity and water as well as education programs to nurture talented chip engineers.

Some have criticized Yoon, saying Monday's announcement was just a repeat of an announcement he made last year, and that he is trying to show the government in a positive light ahead of the parliamentary election in April.

Regardless of political motives behind the updated plan, building up a large, future-oriented chip cluster is a positive step for the domestic semiconductors industry and the Korean economy in general.

Korea has long depended on semiconductors to bolster its export drive. In 2022, the country exported semiconductor products worth $129.2 billion, which accounted for 18.9 percent of total exports.

Last year, however, concerns mounted as semiconductor exports dropped to $98.6 billion, though monthly chip export figures began to rebound in November.

Against this backdrop, both policymakers and chipmakers should spare no efforts in carrying out investments and policy plans at a rapid pace to get the chip cluster initiative on the right track to help strengthen and expand the domestic chip industry, which is falling behind other countries in non-memory technology. The government must focus on supporting chip-related research and development and nurturing the fledgling fabless chip field.

One big question mark remains on the shortage of chip experts. On Monday, the government unveiled a plan to nurture 30,000 undergraduate-level workers and around 3,700 advanced-degree experts at the master’s and doctoral levels. The government also plans to increase the number of universities specializing in chip education from the current level of eight to 18.

In implementing these lofty goals, however, policymakers should face the challenging reality. Despite universities and companies offering enticing perks such as generous scholarships and the promise of job security, even top-tier universities are witnessing an exodus of talented students from semiconductor-related departments to medical schools.

Just as Yoon emphasized “speed” in nurturing the chip sector, fast decision-making and timely investments are crucial. But the government must also take steps to tackle a host of hurdles in implementing its ambitious chip cluster initiative.