South Korea to aid chipmakers to avert Trump threat

South Korea's ruling party has introduced a "Special Chips Act" aimed at supporting the country's semiconductor industry with subsidies and flexibility in labour regulations. Proposed on November 11, this legislation is intended to strengthen the competitiveness of South Korean chipmakers amid potential policy changes from the United States, including tariff threats on Chinese goods by former U.S. President Donald Trump, who is all set to occupy the White House again.

Semiconductors are essential to South Korea’s economy, accounting for 16% of total exports last year. President Yoon Suk Yeol recently cautioned that proposed U.S. tariffs on Chinese imports could lead to reduced chip prices from Chinese competitors, impacting South Korean firms' performance in global markets.

The new bill, which still requires support from the main opposition party to become law, proposes various measures to protect South Korean semiconductor giants like Samsung Electronics from increasing competition from countries like China, Taiwan, and the U.S., where governments are also providing subsidies to boost their own semiconductor sectors. According to Lee Chul-gyu, one of the bill’s sponsors, this legislation is part of a broader effort to help South Korean chipmakers navigate the intense competition in the global semiconductor industry.

The bill would also allow R&D employees to work extended hours, bypassing the current 52-hour weekly limit imposed by South Korean labour law. However, this proposal has faced opposition from Samsung’s labour union, which argues that the company should not attribute its management challenges to working-hour restrictions. The union’s stance follows Samsung’s recent apology for lower-than-expected profits and delays in capturing the growing demand for AI chips, where rivals such as TSMC and SK Hynix have taken the lead.

Amid escalating trade tensions, Trump recently warned that he might withdraw federal subsidies for foreign chipmakers, including South Korea’s Samsung and Taiwan’s TSMC, in favour of implementing import tariffs, adding further pressure on South Korea’s chip sector.