South Korea joins global chip battle with $19B war chest

South Korea has raised the stakes in the global AI chip battle, promising 26 trillion Korean won (US$19 billion) in state funding to grow the local industry.

Declaring that semiconductors were "a field of all-out national warfare," President Yoon Suk Yeol announced a broad package Thursday aimed at boosting all segments of the domestic industry.

The biggest portion will be a KRW17 trillion ($12.4 billion) loan scheme, channeled through the Korea Development Bank, to help firms fund their expansion, state news service Yonhap reported.

Another part of the package will allocate KRW2.5 trillion ($1.8 billion) for the rapid construction of key infrastructure such as roads and water to enable the creation of "semiconductor mega clusters."

It also aims to set up a KRW1 trillion ($730 million) industry ecosystem fund to help fabless and chip material SMEs.

It will further set aside KRW5 trillion ($3.7 billion) to nurture R&D talent over the next three years, up from KRW3 trillion ($2.2 billion) for the current period.

The funding program is in addition to $55 billion in government tax credits already available, according to figures compiled by Bloomberg.

'Industrial war'

The announcement follows the unveiling of a 3.9 trillion yen (US$24.8 billion) three-year program by neighbor Japan last month.

While large in terms of their own economies, both of these schemes are dwarfed by the huge outlays by China ($142 billion) and the US ($39 billion).

"Nowadays, countries around the world are putting their national fates on semiconductors. This is literally waging an industrial war," Yoon said in a speech.

He said Korean firms had dominated the memory field over the past 30 years, but in the future success or failure would depend on their ability to master new-generation processor and system chips, like GPUs and AI semiconductors.

Currently, SK Hynix and Samsung Electronics are the biggest suppliers of high bandwidth memory (HBM) chips that are capable of processing huge volumes of AI data. SK Hynix holds more than 50% global market share.

The two companies also have the most aggressive HBM production plans, says research firm Trend Force, which expects HBM share of global memory revenue will grow from 8% to around 20% this year.

Korea has set a national goal of becoming one of the top three countries in AI semiconductors, advanced biotech and quantum technology by 2030.