South Korea Sets Aside Record $19 Billion to Fuel Chipmaking

Soo-Hyang Choi, Yoolim Lee and Shinhye Kang, Bloomberg News

, Bloomberg reporting and research, Semiconductor Industry Association

(Bloomberg) -- South Korea has unveiled a $19 billion package of incentives to bolster its chip sector, a boon to Samsung Electronics Co. and SK Hynix Inc. as they race to stay ahead in an increasingly competitive industry.

The 26 trillion won program includes 17 trillion won of financial support for certain investments as well as tax incentives, the presidential office said in a statement. The total is more than double the 10 trillion won Finance Minister Choi Sang-mok had proposed less than two weeks ago. Shares in Samsung and SK Hynix ended about 1% higher.

The record program follows calls to support the local chip industry as governments from the US to China spend billions to attract and propel manufacturing projects by the likes of Taiwan Semiconductor Manufacturing Co. and Intel Corp. That spending spree is accelerating as Washington-Beijing tensions threaten to snarl the supply of components critical to most modern devices and the military.

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Korea, the world’s biggest memory chip producer, has long preferred private conglomerates such as Samsung and SK to lead investment efforts. But the government is now playing a more active role and has led plans to erect a mega-cluster of chip plants located outside of Seoul.

The latest package represents the Asian nation’s biggest single outlay of chip industry support yet. The government aims to finalize the details in June.

--With assistance from Seyoon Kim.

(Updates with financing breakdown from the third paragraph)