The "semiconductor special act" to back Samsung Electronics and SK hynix's 800 trillion won investment in a Honam semiconductor project will take effect next month. The law allows the government and local governments to provide broad fiscal support not only for the expense of building power and water infrastructure to create semiconductor clusters but also for students' tuition in semiconductor contract departments.
But the law was submitted to the National Assembly and passed without an "expense estimate." That means there was no analysis of how much fiscal outlay would be required to implement it. The government's semiconductor industry-related fiscal support is currently estimated at 1 trillion to 2 trillion won a year, but because the semiconductor special act expands the targets and scope of support, some analyses say at least tens of trillions of won could be spent.
◇ From power and water infrastructure to students' tuition... various fiscal support grounds set in the enforcement decree
The semiconductor special act, a campaign pledge by Lee Jae-myung, passed the National Assembly on Jan. 29 and will take effect on the 11th of next month. The law says the government and local governments should support the entire domestic semiconductor ecosystem fiscally and administratively. It allows the government to designate semiconductor clusters, ease regulations such as permits and approvals for tenant corporations, and provide fiscal and administrative support. It also states that the government will establish a basic plan every five years to strengthen the competitiveness of the semiconductor industry and set up special accounts for semiconductors.
However, the law delegates the specific scope and methods of fiscal support to an enforcement decree or presidential decree. According to the enforcement decree preannounced by the Ministry of Trade, Industry and Resources on the 25th of last month, the government and local governments may cover "at least 50% of total project expense" for infrastructure such as power and water to build semiconductor clusters. If the Minister of the Ministry of Trade and Industry (MOTI) deems it necessary, full support is also possible. For small and medium-sized enterprises moving into non-capital region clusters, support can also be provided to improve settlement conditions such as labor, housing, education, medical care, and cultural facilities.
In addition, it includes all-around fiscal support measures for the overall semiconductor industry. Under the law, the government may provide fiscal and financial support related to research and development, workforce development, patent disputes, and exports for small and medium-sized corporations, mid-sized corporations, and corporations in materials, parts, equipment, and system semiconductors. It also says that to attract outstanding talent from overseas, support may be provided for their families' adaptation to life in Korea and for stable housing and settlement. For semiconductor industry professional training institutions and semiconductor-specialized universities, it can provide operating costs for curricula, facility construction costs, research funds, and personnel expenses for faculty. In addition, if a corporation establishes a semiconductor contract department at a university, it may cover all or part of the students' tuition.
◇ They said expense calculation is difficult, so no estimate... "concern that excess semiconductor tax revenue could be injected without limit"
The government's fiscal support related to the semiconductor industry is currently said to be estimated at about 1 trillion to 2 trillion won a year. The semiconductor special act specifies broader support than before, and because there is no cap on support, there are projections that at least tens of trillions of won in fiscal resources could be injected going forward.
However, the bill was not accompanied by an expense estimate at the submission stage. Under the National Assembly Act, when introducing a bill requiring budget measures, an expense estimate from the National Assembly Budget Office must be submitted together. If it is technically difficult to calculate the required expense, it may be omitted. The semiconductor special act reportedly lacked an expense estimate for this reason.
Initially, among the drafts of the semiconductor special act introduced by the Democratic Party of Korea, there was language requiring the government and local governments to establish a plan for raising funds. But that wording was removed as the bills were consolidated into one. Now, Article 3 of the law contains only a formal phrase that the state and local governments should strive to secure the necessary financial resources in a stable manner.
During the bill review process at the Trade. Industry Energy. SMEs. and Startups Committee of the National Assembly, concerns about the accompanying large fiscal expense were hardly addressed. Some lawmakers instead argued that the law's wording should be changed to require "full support for cluster infrastructure expense," saying the government could delay fiscal support. After the government objected, the current provision states that "all or part should be prioritized for support."
Ahn Cheol-soo of the People Power Party said on Facebook on the 1st, "The materials for the public briefing said the special accounts (for the Honam semiconductor cluster plan) would start at 2 trillion won next year and expand every year," adding, "At this rate, excess semiconductor tax revenue, expected to reach up to 100 trillion won over three years, could be laundered under the name of special accounts and injected without limit into Honam semiconductor infrastructure."