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(EDITORIAL from Korea Times on April 26)

Editorials from Korean dailies 07:06 April 26, 2021

New semiconductor strategy
Special panel launched to beef up chip industry

The ruling Democratic Party of Korea (DPK) has launched a special committee to come up with measures to beef up the country's semiconductor sector. On Friday, the panel began operations with the aim of drafting a special bill on how to support chipmakers by the end of August.

The committee is composed of 25 DPK lawmakers with government officials and former executives of Samsung Electronics and SK hynix joining as advisers. Its launch is welcome, though somewhat belated, coming amid an acute global shortage of semiconductors, particularly those for automotive use. The move follows a virtual summit hosted by U.S. President Joe Biden earlier this month to tackle the chip shortfall.

Regrettably, however, the Moon Jae-in administration has done little to address the shortage, causing a halt in the operation of assembly lines at Hyundai Motor and other local carmakers. The government cannot avoid criticism for taking a hands-off approach, despite the ongoing global "semiconductor war."

The U.S. has begun to form a semiconductor alliance with Japan, Taiwan and European countries to create its own supply chains as well as block China from catching up with it technologically. During the summit with the CEOs of 19 global manufactures including the Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung Electronics, President Biden called for their investment in chip making facilities in America.

Semiconductors have emerged as a strategic material directly linked to national security. That's why the race for chips is escalating on top of the growing rivalry in geopolitics and trade between the U.S. and China. The U.S.-led semiconductor alliance appears to be turning into a technology alliance associated with its security alliance against China.

It is worth noting that the U.S. has decided to provide a 40 percent tax deduction for semiconductor facility investment in the country. According to the White House, Biden's $2 trillion infrastructure investment package includes $50 billion for semiconductor production and research. The European Union (EU) plans to make a huge investment to reduce its dependence on foreign-made chips. China is seeking to increase its semiconductor self-sufficiency rate from 15.7 percent in 2019 to 70 percent by 2025.

Against this backdrop, South Korean chipmakers alone cannot cope with the ever-intensifying global competition. Thus, the government needs to play a proactive role to transform semiconductor manufacturing into a strategic industry crucial to the Fourth Industrial Revolution.

South Korea has become a leader in the global memory chip market. However the country's share in the non-memory chip market was a meager 3.2 percent as of 2019. Samsung Electronics, one of the world's largest memory chip manufacturers, plans to invest 130 trillion won ($116 billion) into non-memory chips by 2030. The nation cannot be a semiconductor powerhouse in a real sense without boosting this sector.

The DPK's special committee should work together with the government and the business community to set forth a new strategy for the development of the semiconductor industry. Any envisioned special bill needs to offer more incentives, including tax deductions on facility investment and research and development (R&D) spending, for chipmakers. Most of all, it is imperative to push for deregulation to allow semiconductor manufacturers to set up their factories more easily and conduct their businesses more freely.

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