The government is reportedly reviewing a plan to exclude the greater Seoul area when designating a "semiconductor cluster" that would receive national budget support to foster the chip ecosystem. Earlier, under the 2023 Advanced Strategic Industries Act, the government designated Yongin, Gyeonggi Province, as a semiconductor cluster. The newly designated semiconductor cluster is said to receive more groundbreaking regulatory relief and other benefits than Yongin.
Taiwan, which built a semiconductor ecosystem earlier than Korea, is also credited with successfully establishing a semiconductor aggregation complex outside the capital region. Analysts say this was not about ordering factories to be built in the middle of nowhere, but about offering large-scale tax incentives in places with universities and research facilities, where securing talent is easier, so that corporations would flow in naturally.
◇ Government reviews excluding the greater Seoul area when designating "semiconductor clusters"
The semiconductor cluster is based on the "Special Act on Semiconductors," which passed the National Assembly in Feb., and is one of President Lee Jae-myung's campaign pledges. Once designated a semiconductor cluster, national funds support infrastructure such as power, water, and roads, and benefits include ▲ exemption from preliminary feasibility studies ▲ expedited licensing and permits ▲ reductions in fees for the use of national and local government property and development charges.
With the Special Act on Semiconductors set to take effect in Aug., the Ministry of Trade, Industry and Resources plans to soon finalize the enforcement decree detailing the requirements and support policies for new cluster designations. The government is said to be reviewing adding "areas outside the greater Seoul area" to the designation requirements in the enforcement decree.
An official at the Ministry of Trade and Industry (MOTI) said, "The Special Act on Semiconductors is intended to ease overconcentration in the capital region by strengthening support for new clusters in the provinces," and added, "We are gathering opinions from relevant ministries and local governments."
◇ Taiwan builds "science industrial parks" outside the capital region where universities and research facilities are located... offering tax incentives to draw corporations
Taiwan is currently building a semiconductor belt spanning Hsinchu in the north, Taichung in the center, and Tainan in the south. They are 70 km, 134 km, and 265 km from the capital Taipei, respectively. Hsinchu Science Park, the center of the semiconductor belt, hosts more than 900 companies ranging from design corporations such as MediaTek to back-end companies such as ASE, including TSMC, the world's largest foundry (contract chip manufacturing) company. All processes from design to production take place within the park. Last year, corporations in the science industrial parks generated total sales of 5.8 trillion Taiwan dollars (about 280 trillion won).
The starting point of this semiconductor belt is Hsinchu Science Park, established by the Taiwanese government in the 1980s. The government chose Hsinchu because it was a region where securing outstanding science and engineering talent was easier. Hsinchu is home to the government-affiliated applied technology research body Industrial Technology Research Institute (ITRI). TSMC spun off from ITRI. Hsinchu also has National Tsing Hua University (NTHU) and National Yang Ming Chiao Tung University (NYCU), two of Taiwan's top three science and engineering universities.
The government granted bold tax benefits to Hsinchu Science Park to attract corporations. It fully exempted resident companies from corporate tax for the first five years. It also exempted tariffs on equipment and materials and supplies imports for as long as they resided in the park. It provided tax credits of up to 50% for R&D expense. As a result, 105 corporations moved in within 10 years of the park's creation. The Taiwanese government applied the success formula proven in Hsinchu directly when establishing the Southern Tainan Science Park in 1997 and the Central Taichung Science Park in 2003.
Taiwan's example offers policy lessons for Korea in that it did not simply order production facilities to move to the provinces, but designed tax support in places with infrastructure such as research institutes and universities so that corporations would naturally choose the provinces. The European think tank European Centre for International Political Economy (ECIPE) noted, "Not only are high-tech companies located in the science industrial parks, but skilled labor and R&D activities also come together to create a strong synergy effect."