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Questions arise on whether or not the “Special Act on Semiconductors,” which has been stalled for more than three months, will find a breakthrough.
With a series of bills introduced to support the semiconductor industry, the focus is now on whether the passage of the Special Act on Semiconductors will save the related industries.
Discussions on the Special Act on Semiconductors, which has been stalled for more than three months, are expected to resume.
On the 22nd, Democratic Party of Korea Rep. Han Jung Kim, a secretary of the Trade, Industry, Energy, SMEs, and Startups Committee, proposed the “Act on Special Measures for Strengthening and Protecting the Competitiveness of National Advanced Strategic Industries” and the “Partial Amendment to the Restriction of Special Taxation Act.”
Previously, the Democratic Party of Korea has been putting the brakes on the so-called “K-Chips Act,” which independent lawmaker Hyang Ja Yang, head of the Semiconductor Special Committee, proposed in August, citing how it gives “special favors for large enterprises.” As such, it is evaluated that the Democratic Party’s attitude towards the proposal for this bill is prospective. Furthermore, as there is a consensus both inside and outside the National Assembly on the need to support the semiconductor industry, expectations for the passage of the Special Act on Semiconductors this year are growing.
Although the overall framework is similar, the Democratic Party of Korea’s bill seems to focus more on reducing difficulties in licensing the process of high-tech industries and increasing the tax credit rate for each company when investing in semiconductor facilities. The People Power Party’s bill calls for simplifying the factory licensing process, permitting for universities in the Seoul metropolitan area to increase the number of students in semiconductor departments, and raising the ratio of tax deductions for related facility investments to 20%.
| Proposer |
Hyang Ja Yang, an independent lawmaker
(Chairperson of the Special Committee on Semiconductors) |
Han jung Kim, a lawmaker of the Democratic Party of Korea |
| National Hign-tech Strategic Industry Act |
Simplifies approval for specialized complexes |
Simplifies approval for specialized complexes |
| Approves semiconductor departments in the Seoul metropolitan area to increase their number of students |
Adjusts the number of students of semiconductor departments within the regulation of the total amount of students in the metropolitan area |
| Restriction of Special Taxation Act |
Expands tax credits for investment in high-tech industrial facilities |
Expands tax credits for investment in high-tech industrial facilities |
| 20% increase for large enterprises |
10% increase for large enterprises |
| 25% increase for middle-standing enterprises |
15% increase for middle-standing enterprises |
| 30% increase for small and medium-sized enterprises |
30% increase for small and medium-sized enterprises |
However, the “Partial Amendment to the Restriction of Special Taxation Act” is expected to take more time to come to a consensus as the gap between the ruling and opposition parties’ opinions is wide. The People Power Party’s amendment bill expands the tax credit ratio for investment in high-tech industrial facilities to 20% for major companies. On the other hand, the Democratic Party of Korea’s bill expands it to 10%. In response, the government maintains that the current limit can only be only raised to 8%. Thus, related discussions are likely to continue until next year. As the Trade, Industry, Energy, SMEs, and Startups Committee will hold a meeting this week to review the amendments of the People Power Party and Democratic Party of Korea, discussions on the Special Act on Semiconductors are expected to begin in earnest.
In the meantime, the Special Committee on Semiconductors of the People Power Party announced that it would start its “Season 2” activities next month. “Season 2” is said to include the National Assembly’s passing of the bill to strengthen competitiveness in the semiconductor industry (the so-called “K-Chips Act”) proposed during “Season 1” and even the preparation for the situation after the passing.
While discussions on the Special Act on Semiconductors have been continuously postponed, the semiconductor industry is experiencing difficult times. Due to the deepening memory semiconductor recession and the contraction of the global economy, even Samsung Electronics, the No. 1 company in the global semiconductor industry, lost its throne to Intel. This is why the industry empathizes with the need for industrial support and desperately wants the passage of the bill.
Countries are making every effort to foster the semiconductor industry, providing unconventional tax benefits. The U.S. passed the $52 billion law to support semiconductor industry, and Taiwan invested immense amounts of money in fostering human resources and expanding facilities. In Japan, eight major companies, including Toyota and Sony, launched a joint venture called “Rapidus” to develop high-tech semiconductors, and the Japanese government is also providing full support.
Industries are paying keen attention to whether the K-Chips Act (Special Act on Support for Semiconductors) will be able to cross the threshold of the National Assembly within the “golden hour” to save Korean companies in crisis in the intensifying global semiconductor war.
As the first-ever Korean law firm to issue specialized legislative journals, DR&AJU LLC has been publishing the monthly Policy & Business Report since August 2019. The November 2022 issue of the P&B Report conducted a full inspection of legislation proposed to the National Assembly Subcommittee, Standing Committee, and Plenary Session from October 15, 2022, to November 14, 2022, and selected and analyzed legislation with a significant impact on corporate activities. In the case of major legislation, key mentions of legislators, members of the Standing Committee, and government officials are included.
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