South Korea offers up to 100% state funding for semiconductor cluster infrastructure

South Korea is rolling out extensive government support, potentially covering 100% of costs, for infrastructure development in its semiconductor clusters. This move is framed as a crucial macroeconomic policy to channel excess liquidity from the semiconductor boom into factories, power grids, water infrastructure, research facilities, and related industries, rather than real estate. "This is a macroeconomic policy to channel excess liquidity generated by the semiconductor boom into factories, power grids, water infrastructure, research facilities, equipment industries, and new cities, not real estate," said Kim Yong-beom, senior secretary for economic policy at the presidential office. Minister of Trade, Industry and Energy Kim Jeong-kwan emphasized that these are "strategic decisions made by companies looking to the future," pledging swift support for all infrastructure needs like land, power, water, and roads, and close cooperation with local governments to streamline permits. The government's strategy is to reinvest the massive tax revenues from the semiconductor boom back into the industry. The goal is to build an insurmountable 'cost barrier' and a 'technological moat' against global competitors such as the United States and China. To achieve this, the government has promised comprehensive support for the creation of semiconductor cluster infrastructure. Existing laws, like the Act on the Promotion of National High-Tech Strategic Industries enacted in February 2022, already supported advanced industries. The Yoon Suk-yeol administration designated Yongin and Pyeongtaek as semiconductor special zones based on this law. However, the newly enacted Special Act on the Promotion and Support of the Semiconductor Industry, established in February of this year, has a clearer objective: to protect 'semiconductor sovereignty' amidst the global race for semiconductor dominance fueled by AI, autonomous driving, and humanoid robots. This new law and its enforcement decree, announced on March 25, specifically detail support measures for essential elements like power, RE100 (renewable energy usage), and water. The enforcement decree outlines support for power grid undergrounding, renewable energy facilities, and wastewater reuse systems – critical components for new semiconductor clusters. While previous laws allowed for support of infrastructure costs, the new decree offers basic support of 50% to a maximum of 100% of national funding for all regions, regardless of location. This opens the door for benefits to not only the Honam semiconductor cluster but also existing special zones like Yongin and Pyeongtaek. "We aimed to comprehensively include the infrastructure necessary for semiconductor production," said an Industry Ministry official. "Under the Semiconductor Special Act, if existing special zones like Yongin are designated as new clusters, they can receive support." The scope of support is broad, covering power supply facilities like undergrounding power lines, redundancy for disasters, and renewable energy integration. For water supply, the support extends to reuse systems, crucial given the high daily water demand of semiconductor manufacturing. This focus on water reuse mirrors efforts by competitors like TSMC, which has achieved up to 90% reuse in its manufacturing processes. The government's plan aims to accelerate semiconductor production by seven years for Samsung Electronics and twelve years for SK Hynix through these comprehensive infrastructure supports.

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This is a macroeconomic policy to channel excess liquidity generated by the semiconductor boom into factories, power grids, water infrastructure, research facilities, equipment industries, and new cities, not real estate.