Squeezed by China and having handed over the lead in the global display market, Korea's industry visited the National Assembly to call for improvements in tax support. Displays have been a cash-cow export industry alongside semiconductors, but there is growing alarm that Korea could miss the "golden time" for next-generation OLED investment because the current tax system lags far behind that of competitors such as the United States and China. The industry urged the government to act quickly, saying, "If reform is not made now, we could lose the lead in OLED after LCD."
◇ Industry including Samsung Display and LG Display says "tax reforms to competitor levels are essential"
At the "forum to diagnose the crisis in the display industry and prepare strategies to strengthen competitiveness," held at the National Assembly Members' Office Building in Yeouido, Seoul, on the 23rd, Korea's display industry, including Samsung Display and LG Display, spoke with one voice that support policies such as tax credits should be supplemented to the level of competing countries. About 60 people from politics, including Rep. Lee Jae-gwan, and from industry and academia attended the event.
Samsung Display stressed that it is urgent to extend the carryover period for tax credits in light of the characteristics of a large-scale equipment industry. A tax credit carryover is a system that allows the tax reduction benefit that cannot be used immediately due to a loss in the first year of investment to be deferred and used in the future when profits arise. Park Jun-young, head of planning at Samsung Display (executive vice president), pointed out that this very "period" of deferral is out of touch with reality.
He said, "When investing in a next-generation line, it can take more than 15 years to recoup the investment and generate stable profits," and added, "But the current carryover period is only 10 years, which creates a problem where, by the time profits arise and you try to receive a tax reduction, the benefit's validity period has already expired." Park said, "The United States allows up to more than 20 years, and Germany and the United Kingdom allow it indefinitely, while Korea's period is less than half as long," and urged, "The carryover period for tax credits for national strategic technologies should be extended to at least 20 years to reduce corporations' investment uncertainty."
LG Display pointed out a blind spot in the system in which tax benefits cannot be received if a large-scale investment leads to a loss, and requested the introduction of a direct refund system. The current national strategic technology investment tax credit deducts 15% of the investment amount (for large corporations) from corporate tax. Lee Han-gu, head of the management support group at LG Display, said, "If a business posts a loss in the year when a large-scale investment is made, corporations end up with no corporate tax to pay," adding, "Ultimately, a dilemma arises in which no tax benefits can be received at the very time when funds are most needed." He proposed the U.S. "Direct Pay" system as an alternative and appealed, "If a system is introduced in which the government directly refunds part of the investment expense regardless of profit and loss, we will be able to continue investing for the future even in a crisis."
◇ "China to overtake Korea's OLED production capacity in three years"
The industry made these demands because China, based on massive government support, has built a virtuous cycle in which monopolistic revenue earned from LCDs (liquid crystal displays) is funneled into investment in next-generation OLEDs (organic light-emitting diodes). China has effectively cemented a monopoly in the LCD market, with a 70% share of TV panels and 68% of monitors. The funds secured this way are being injected as "ammunition" to threaten the OLED market led by Korea. Park Jin-han, a director at Omdia, said, "China first entered the market for smartphone OLEDs in 2017, and its share has surged to 48% this year; next year it is likely to overtake Korea."
The investment race for the "8.6-generation OLED," which will decide the lead in the future market, is even fiercer. This refers to next-generation technology that uses larger glass substrates than the current mainstream 6th-generation process to maximize production efficiency for panels used in IT devices such as laptops and tablets. As soon as Samsung Display made a large-scale investment in an 8.6-generation OLED line for IT last year, China's BOE and others immediately launched follow-up investments and are aggressively moving up their mass production timelines.
LG Display has been reviewing investment in an 8.6-generation line for two years, but it is difficult to invest immediately due to accumulated losses from failed investments in TV panels over the past several years. Park warned, "At this pace, by 2028 China will overwhelm Korea in 8.6-generation production capacity," and added, "Even with a technological edge, if we fall behind in capacity, we cannot guarantee market leadership."
Korea's display materials, parts, and equipment industry also raised its voice, saying that support measures commensurate with competitor levels should be prepared. Kim Byung-wook, CEO of DONGJIN SEMICHEM, said, "Competing countries operate systems that provide a tax credit for a certain percentage of the amount when domestic materials and parts are used," and added, "Through such incentives, we should lay the foundation for the competitiveness of domestic materials, parts, and equipment corporations." Moon Sung-joon, CEO of HB Technology, also stressed, "With the current preliminary feasibility study system, which is complex and time-consuming, it is difficult to keep up with the pace of technological change," and said, "For strategic industries, we should introduce a 'fast track' to expedite deliberations, and for next-generation fundamental technologies that are difficult for corporations to shoulder alone, the government should invest preemptively to establish a demand-driven R&D system in which panel makers and materials, parts, and equipment companies participate together."