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The amendment operates through Korea's existing "national strategic technology" (NST) investment credit framework, introduced in the December 2022 tax law revision:
1. Investment tax credit (ITC) rates. A qualifying "national strategic technology" facility investment receives a direct credit against corporate tax. The March 2023 amendment set the rates at: - Large corporations (대기업): 15% of qualifying CAPEX - Small and medium enterprises: 25% Both rates are applied to the gross investment amount in the tax year (retroactive to 1 January 2023).
2. Incremental bonus (2023-2025). Companies that invest above their three-year average receive an additional 10% credit on the incremental portion. This is a time-limited accelerant to front-load domestic capital expenditure during the critical 2023-2025 capacity-expansion window.
3. Qualifying technology perimeter. The NST list under the Act covers six technology categories: semiconductors, secondary batteries, displays, vaccines, future vehicles (advanced EV/FCEV platforms), and hydrogen. The semiconductor subcategory includes wafer fabrication equipment, photomasks, advanced logic nodes, DRAM, NAND, and HBM-class advanced packaging.
4. Retroactive effective date. The January 1, 2023 effective date means Samsung and SK Hynix could claim enhanced credits on all 2023 capital expenditure incurred before the March 30 vote.
KRW 25-30 trillion per year on domestic semiconductor capital expenditure. A 15% ITC on that base implies KRW 3.75-4.5 trillion (approximately $3bn) in annual tax savings for Samsung alone. SK Hynix's domestic capex adds another KRW 10-15 trillion. The combined annual public subsidy equivalent is among the largest of any single national semiconductor support measure outside the US CHIPS Act.
explicitly framed by the Korean government as a response to the US CHIPS Act's 25% ITC and the EU Chips Act subsidy push. Without competitive incentives, Korean government and industry leadership publicly warned that Samsung and SK Hynix might tilt incremental capex toward US greenfield fabs (Taylor, TX for Samsung; Purdue, IN for SK Hynix) at the expense of domestic expansion.
account for approximately 70% of global DRAM production and 50% of NAND flash. The K-Chips Act ITC, by lowering the effective cost of domestic fab investment, reinforces Korea's role as the primary non-Taiwan node in the global memory supply chain.
domestic investment plan (KRW 300 trillion / $228bn through 2047) in the weeks surrounding the act's passage. The Yongin Semiconductor Cluster (planned fab complex for 3nm and below logic + HBM) was announced as the centerpiece, directly enabled by the enhanced ITC.
The responds_to edge to 2022-08-09-us-chips-and-science-act reflects a direct regulatory-race dynamic:
manufacturing announced.
8%/16%.
begins preliminary work on KRW 300 trillion plan.
The EU Chips Act (filed: 2023-09-18-eu-chips-act) followed six months later; Japan's enhanced semiconductor subsidies were announced through METI in parallel. The K-Chips Act is the third node in the subsidy- race sequence after the US CHIPS Act.
together represent over 30% of EWY net asset value. An annual $3-5bn subsidy equivalent flowing to those two companies reduces their effective capital cost and supports domestic fab retention.
Korean-fabbed DRAM and NAND supply competing with US-incentivised production. Near-term: supports Korean price-competitiveness in commodity memory. Longer-term: adds capacity discipline risk if all major jurisdictions subsidise simultaneously.
foundry side. Samsung Foundry's Yongin investment (targeting 3nm and below) is in direct competition with TSMC's Arizona and Japan expansion. The ITC lowers Samsung Foundry's break-even utilisation rate and may improve its ability to offer competitive pricing to fabless clients.
(SK Hynix M15X) is among the qualifying investments. HBM is the current capacity-constrained AI-infrastructure input; Korean ITC support accelerates the ramp.