• South Korea increased semiconductor investment to $23.2 billion.
• Seoul’s expanded support package to strengthen domestic chipmakers.
• Samsung and SK Hynix navigate growing US protectionism.

South Korea has increased its semiconductor investment dramatically to ₩33 trillion (US$23.2 billion) as the nation moves to shield its important chip industry from mounting global pressures.

The expanded support package, announced Tuesday, represents a 27% increase from the ₩26 trillion that was pledged last year, underscoring Seoul’s determination to protect an industry that accounted for 21% of the country’s total exports in 2024. The announcement comes just days after president Trump stated he would reveal new semiconductor import tariff rates within the week, creating additional uncertainty for Korean chipmakers already navigating complex geopolitical tensions.

Strategic response to “increased uncertainties”

South Korean officials cited “increased uncertainties” with the United States as a driver behind the enhanced funding. The comprehensive package covers infrastructure development, low-interest loans for companies in the sector, and initiatives to recruit skilled workers in semiconductor firms.

Government officials confirmed that at least ₩4 trillion ($2.8 billion) will be deployed by 2026. Finance Minister Choi Sang-mok spoke about the government’s approach, following the announcement: “We will consult actively with the US over its Section 232 investigations into semiconductor imports to minimise any adverse impact on domestic companies.”

The expanded financial assistance programme directed specifically at the chip industry, will now reach ₩20 trillion ($14 billion), up from the previously allocated ₩17 trillion, according to the joint statement from multiple government ministries.

Protecting a vital economic engine

The significance of this South Korean semiconductor investment cannot be overstated. In 2024, the country’s semiconductor exports reached $141.9 billion, with shipments to China and the US standing at $46.6 billion and $10.7 billion respectively. South Korea hosts the world’s top memory chip manufacturers, Samsung Electronics and SK Hynix, the latter an important partner to chip giant Nvidia.

However, industry analysts have noted that Korean firms have fallen behind competitors in specialised areas like chip design and contract manufacturing, creating additional pressure to innovate.

Navigating Trump’s tariff threats

The timing of Seoul’s announcement appears calculated to have maximum impact, coming just days after Trump signalled imminent action on semiconductor tariffs. On Sunday, he indicated he would announce semiconductor import tariff rates in a week, though he suggested there might be “flexibility with some companies in the sector.”

The latest support package is the second announced by South Korea in recent days. Last week, the government unveiled emergency measures for its automotive sector, which has also been targeted by the Trump administration’s protectionist policies. Those measures included financial support, tax cuts, and subsidies to stimulate domestic demand. Industry observers view the parallel actions as part of a coordinated response to shield South Korea’s export-dependent economy from volatility.

Balancing act: US relations and Chinese competition

The expanded South Korea semiconductor investment package will address two issues: managing relationships with the US, and responding to intensifying competition from Chinese rivals.

South Korean chipmakers face a complex environment where they must maintain access to the US market and preserve their significant business with China, which remains still the country’s largest export destination. The balancing act has grown more difficult as US-China tech tensions have escalated. The government’s statement acknowledged the two pressures, noting that the measures come “in response to calls on the government to expand support at a time of growing policy uncertainty under the current US administration and rising competition from Chinese rivals.”

Industry context

The country’s semiconductor companies Samsung Electronics and SK Hynix lead the global memory chip market. However, pressure from US tariffs will impact exports, there’s the threat of aggressive Chinese investments in its domestic semiconductor infrastructure, and competition from Taiwan and the US comes in the form of chip manufacturing.

The additional South Korean semiconductor investment provides some financial reassurance to the industry, but the challenges extend beyond funding to include broader geopolitical and trade issues that financial measures alone cannot address fully. The Korea Semiconductor Industry Association has spoken in the past about the strategic importance of the semiconductor sector to the national economy and the challenges it faces currently.

Looking ahead

As Seoul ramps up its semiconductor support, diplomatic engagement will be equally important to financial backing. South Korean officials have indicated they will seek negotiations with the US to mitigate potential tariff impacts, similar to their approach with regards to the issues Korea faces in the automotive sector. The effectiveness of a dual strategy – increased domestic support coupled with international diplomacy – will help determine whether South Korea can preserve its position as a global semiconductor powerhouse. What remains clear is that South Korea views its semiconductor industry as non-negotiable for the nation’s economic future. It will to deploy significant resources to safeguard the sector regardless of international pressure.