South Korea plans to boost financial support for domestic chipmakers next year, seeking to shore up the sector in the face of potentially unfavorable policies from newly elected U.S. President Donald Trump's administration and growing competition from Chinese companies.

South Korea's finance ministry said in a statement on Wednesday that financial support - which will include loans, insurance and guarantees provided by state-run institutions - will amount to 14.3 trillion won ($10.2 billion) next year, as part of ongoing policies to stimulate the sector.

It also noted a plan to cover a "significant portion" of the 1.8 trillion won cost of burying power cables underground at chipmaking hubs south of the capital, Seoul.

South Korea in July launched a 26 trillion won aid package, part of which will be earmarked for next year's support package.

In addition, the government plans to raise the tax credit rate for companies operating in the semiconductor sector by 10 percentage points, and establish a 4 trillion won national “AI computing” center by 2030.

Trumpian Challenges for Korean Chips

South Korea is stepping up efforts to boost the country's "economic jewel" sector, amid Trump's pledges to support domestic manufacturing in the United States and reduce reliance on foreign supply chains.

While the state has continued to provide financial support to chipmakers, Trump's election has provided an impetus to accelerate the protection of the growth of this vital sector.



In its statement, the ministry stressed that there is a possibility of growing economic uncertainty following the new US administration, although US-South Korean relations could benefit in areas such as defence and shipbuilding.

In the same context, Samsung Electronics, the largest South Korean company, is working to build a semiconductor factory in the US state of Texas, supported by funding under the “Chips and Science Act” passed by the Biden administration, a program that faced repeated criticism from Trump during his election campaign.

Fierce competition from China

South Korea also faces increasing competition from China, which is seeking to strengthen its presence in global supply chains, which could prompt Seoul to provide additional support to keep its tech industries competitive, according to the finance ministry.



The ministry also noted that increasing protectionist policies could impact the South Korean economy, which relies heavily on trade.

Technology exports account for about a third of South Korea’s overseas shipments. The country’s economy is expected to grow at least 2 percent this year from 2023, driven by strong demand for semiconductors, especially memory chips used in developing artificial intelligence technologies.

However, the economic outlook for next year looks less optimistic, especially with exports slowing in recent months, and officials are concerned that Trump will take a tougher stance toward U.S. trading partners once he takes office in January.

This content is from "Economy of the East" with "Bloomberg"