Presidential candidate Jae-Myung Lee proposes a ‘semiconductor special law’ to reinforce South Korea’s leadership amid US-China tensions, focusing on R&D incentives, talent retention, and supply chain resilience.
With China advancing in EUV lithography and TSMC expanding in Arizona, Lee’s $1.5B talent fund and tax credits aim to counter a 20% engineer shortage while navigating rare-earth dependencies.
Lee’s Semiconductor Special Law: Tax Breaks and Talent Wars
Democratic Party candidate Jae-Myung Lee unveiled plans on 23 October 2023 to enact a ‘semiconductor special law,’ offering up to 40% R&D tax credits for large firms like Samsung and SK Hynix. The policy responds to DIGITIMES Asia’s report of a 12.9% YoY rise in South Korean chip exports for Q3, driven by AI demand for HBM3 and DDR5 memory. Kim Yang-Paeng, a researcher at the Korea Institute for Industrial Economics, stated: ‘This isn’t just about subsidies—it’s about creating an ecosystem where SMEs can collaborate with giants on next-gen chips.’
Global Pressures: SMIC’s 5nm Prototype and TSMC’s Arizona Bet
TechInsights confirmed on 23 October that China’s SMIC developed a 5nm EUV lithography prototype, though yields remain below 30%. Meanwhile, TSMC accelerated its Arizona fab timeline, targeting 2nm production by 2026 using $11B in U.S. subsidies. ‘Seoul must balance alliances with ASML for EUV access and reduce reliance on Chinese rare earths, which still comprise 58% of their imports,’ warned Gregory Allen from CSIS.
Talent Shortages and Automation Dilemmas
Samsung’s $230M investment in a 2nm R&D hub (24 October) and SK Hynix’s HBM3E mass production (26 October) highlight progress, but a 20% annual engineer deficit persists. Lee’s $1.5B talent fund aims to train 15,000 specialists by 2030, focusing on AI-driven chip design. Analysts caution that automation could offset 35% of manufacturing jobs by 2027, per McKinsey data.
Historical Context: From 1990s State-Led Growth to 2019 Export Curbs
South Korea’s semiconductor ascent began in the 1990s when state-backed initiatives helped Samsung overtake Japan’s NEC in DRAM production. The 2014 establishment of the National Memory Cube Consortium, involving 57 companies, mirrored today’s public-private R&D push. However, Japan’s 2019 export restrictions on photoresists exposed vulnerabilities in Seoul’s supply chain—a risk Lee’s policy seeks to mitigate through rare-earth stockpiling.
Comparatively, the U.S. CHIPS Act’s $52B subsidies and Japan’s $13B semiconductor fund reflect a global subsidy race. Yet, as Hyundai Research noted in 2022, South Korea’s 21% corporate tax rate remains higher than Taiwan’s 15%, complicating cost competitiveness. Lee’s proposal echoes 2013’s ‘Creative Economy’ agenda but adds urgency due to AI’s explosive demand for advanced memory.
