South Korea’s opposition party presidential candidate, Lee Jae-myung, has proposed a production tax credit of up to 10% for semiconductors manufactured and sold within the country.

He announced this pledge in a Facebook post on April 28, 2025, saying it would be implemented if he wins the election on June 3.

This policy aligns with global efforts to strengthen domestic semiconductor industries amid concerns about supply chain stability.

Several countries, including the US, have initiated similar measures to enhance their chip production capabilities.

🔗 Source: Reuters

🧠 Food for thought

1️⃣ South Korea’s semiconductor support follows decades-long industrial policy tradition

Lee Jae-myung’s proposed 10% production tax credit for domestic semiconductor manufacturing reflects South Korea’s long-established approach to industrial development through targeted government incentives.

Since the 1980s, South Korea has systematically used tax incentives and financial support to promote private R&D activities, particularly based on export performance, which helped transform the nation from a primarily agrarian economy into a technological powerhouse.

This approach helped South Korea emerge as a global leader in semiconductor memory chips despite starting from a position of severe technological limitations in the 1960s, when the country had only two public science and technology institutions.

The government’s National R&D Program, initiated in 1982, created the foundation for today’s semiconductor industry through similar policy mechanisms to what Lee is proposing now.

2️⃣ Global “semiconductor nationalism” intensifies amid supply chain vulnerabilities

Lee’s proposal parallels similar initiatives across major economies, reflecting a global trend toward protecting domestic semiconductor manufacturing capacity as a matter of national security and economic resilience.

The U.S. CHIPS Act represents a $52.7 billion investment in American semiconductor manufacturing, signaling how critical semiconductor supply chains have become to national interests.

South Korea’s renewed focus on semiconductor policy comes as its R&D spending has grown dramatically from just $526 million (0.81% of GDP) in 1981 to $26.3 billion (2.9% of GDP) in 2005, demonstrating the country’s commitment to maintaining technological leadership.

The intensifying competition between nations to secure semiconductor supply chains represents a significant shift from the globalized production model that dominated the industry for decades toward more nationalist industrial policies.