South Korea, traditionally hesitant to provide direct financial support to its semiconductor industry, has announced a new package of measures, including subsidies, to strengthen the sector. Analysts point to Japan’s recently unveiled semiconductor support plan as a major influence behind this policy shift.
On Nov. 22, Japan revealed a ¥10 trillion ($67 billion) economic package to revitalize its semiconductor industry. The initiative includes ¥6 trillion in subsidies for next-generation semiconductor research and power chip manufacturing, alongside ¥4 trillion in financial assistance through investment guarantees and loans.
The Japanese government also left the door open for additional funding for Rapidus, a domestic foundry aiming to mass-produce 2-nanometer chips by 2027. Established by eight major Japanese companies, Rapidus is central to Japan’s effort to reclaim its semiconductor dominance, a position it last held in the 1980s before its industry declined following the U.S.-Japan Semiconductor Pact.
South Korea’s semiconductor industry, while dominant in memory chips, faces growing challenges that some compare to Japan’s earlier struggles. Pressure from low-cost Chinese competitors is driving global memory chip prices down. While South Korea has maintained a competitive edge in high-bandwidth memory (HBM) chips, it continues to lag in system semiconductors and AI-focused chips—key technologies for future growth.
The competition for semiconductor supremacy is intensifying globally. The United States, through its 2022 CHIPS and Science Act, has pledged $52 billion to domestic chip manufacturing and next-generation technology development, including AI and quantum computing.
China has set a goal to achieve 70% semiconductor self-sufficiency by 2030 under its “New Infrastructure Initiative” and “Semiconductor Rise” strategy. Beijing has also mobilized substantial financial backing for domestic chipmakers through its “National Integrated Circuit Industry Investment Fund.”
The European Union has joined the race with its EU Chips Act, aiming to capture 20% of the global semiconductor market by 2030. The EU plans to allocate €43 billion ($46 billion) to expand advanced chip production capabilities.
As U.S.-China semiconductor tensions escalate, particularly with Donald Trump’s potential return to the presidency, and Japan amplifies its competitive push alongside Taiwan, South Korea faces rising fears of losing its footing in the global semiconductor hierarchy.
A Ministry of Economy and Finance official acknowledged the growing urgency. “The government’s semiconductor policies have traditionally focused on tax incentives and infrastructure, but concerns over their sufficiency have persisted,” the official said. “Japan’s aggressive subsidy program has heightened these concerns and prompted us to reassess our approach.”
