South Korea Proposes Legislation to Support Chipmakers

South Korea’s ruling party unveiled new legislation on Monday aimed at bolstering the nation’s semiconductor industry, which plays a crucial role in its export-driven economy. The bill proposes subsidies for chipmakers and seeks an exemption from the national cap on working hours to help the sector navigate mounting risks linked to international trade disputes, particularly with the United States.

Semiconductors are vital to South Korea’s economy, accounting for 16% of total exports last year. The legislation comes as the industry faces increased pressure from multiple fronts, notably from U.S. President Donald Trump’s trade policies. According to Reuters, Trump’s potential tariffs on Chinese goods and the prospect of export restrictions on U.S.-made chips could have serious ramifications for South Korean firms, which already face intense competition from Chinese, Taiwanese and Japanese manufacturers.

South Korean President Yoon Suk Yeol recently expressed concerns over the possible impact of Trump’s tariffs, warning that Chinese competitors could exploit lower export prices to undermine South Korean chip companies in international markets. “These challenges are compounded by the growing competition from semiconductor producers in China, Taiwan and Japan,” Yoon said.

The ruling party’s proposed legislation is designed to counter these threats by providing incentives to local companies like Samsung Electronics and SK Hynix. The bill includes provisions to allow employees involved in research and development (R&D) to exceed the country’s strict 52-hour weekly work limit, a measure that has already faced some opposition. Samsung’s labor union expressed concerns earlier this month, accusing the company of attempting to shift blame for its “management failure” onto the labor law.

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Despite the bill’s potential benefits for the semiconductor industry, it faces significant hurdles in the legislative process. The liberal opposition party, which holds a majority in South Korea’s parliament, is expected to oppose the measure. According to Greg Noh, an analyst at Hyundai Motor Securities, gaining approval for the bill may be difficult due to political resistance.

The bill’s proponents, including lawmaker Lee Chul-gyu, argue that such measures are necessary for South Korean companies to remain competitive amid a global semiconductor trade war, particularly between China and the U.S. “China, Japan, Taiwan and the United States are already offering subsidies to their own manufacturers, and South Korea must act to keep pace,” Lee said in a statement.

Meanwhile, the concerns over the global semiconductor market continued to affect stock prices. Shares of Samsung Electronics and SK Hynix fell further on Tuesday, driven by worries about the possible impacts of Trump’s tariffs and ongoing U.S. restrictions on AI chip sales to China.

Source: Reuters