Hankyung Millennium Forum – Minister of Trade, Industry and Energy
U.S.-led supply chain joins… “We will reflect our understanding”
Minister of Trade, Industry and Energy Lee Chang-yang said on the 16th about the US-led semiconductor alliance ‘Chip 4 (Korea, US, Japan, Taiwan)’, “There is no need to exclude it, and we intend to participate and fully reflect our interests.” This is the first time the government has expressed its intention to participate in Chip 4.
Minister Lee said at the Hankyung Millennium Forum held at the Banyan Tree Hotel in Seoul hosted by the Korea Economic Daily and the Hyundai Research Institute that day, “The semiconductor industry is really something we can’t miss, and we think of Chip 4 from that perspective.” “Korea has strengths in memory semiconductors, Taiwan in foundries (semiconductor consignment production), the United States in equipment technology, and Japan in materials and parts,” he said. There is,” he said. Regarding the topics to be covered in Chip 4, he said, “Discussions are taking place between relevant countries behind the scenes regarding manpower training, technology development cooperation, and information exchange plans.”
Minister Lee’s remarks on this day are meaningful in that he expressed his intention to participate in Chip 4. South Korea has been asked to participate in Chip 4 by the US, but it has not revealed its clear position, conscious of China’s opposition. Accordingly, it was pointed out that Korea is walking a tightrope between the US and China.
However, there were many observations that Korea’s participation in Chip 4 was inevitable in a situation where the United States dominated semiconductor design and equipment by US allies such as Japan and the Netherlands. Korea is competitive in semiconductor production, but less competitive in design and equipment. In this situation, if they do not participate in the US-led Chip 4, the development of Korea’s semiconductor industry could be disrupted. In addition, US regulations on mass semiconductors are getting stronger. The government’s policy to participate in Chip 4 is analyzed as a measure taking this into account. However, the government is in the position that it will not provoke China. It is in that context that Chip 4 said that it is not targeting ‘individual countries’.
“The 1% facility investment deduction rate for large corporations is a shameful number… The interest rate should be the same”
“It is embarrassing to say that the tax deduction rate for facility investment by large corporations is 1%. It should be at least large enough to offset the rise in interest rates.”
Minister of Trade, Industry and Energy Lee Chang-yang announced at the Hankyung Millennium Forum on the 16th that he would expand tax deductions for corporate facility investment. Regarding corporate tax, he said, “A high corporate tax rate is to weed out domestic companies in competition with global companies,” and said, “A corporate tax cut that is at least as high as the global standard is necessary.”
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▷Seoul National University Economics Chair Professor Geun Lee=Steel and shipbuilding seem to be lacking compared to Samsung-led semiconductors and Hyundai Motors-led electric vehicles. The core of Korea’s super-gap strategy is digitalization and smart factory (factory). If many industries do not follow suit, it is only a matter of time before they are eaten by China.
▷ Minister Lee =Digitization is also important, but the biggest barrier in steel and shipbuilding is on the carbon reduction side. Steel exports will be difficult unless carbon emissions are reduced by drastically changing production processes. The same goes for Joseon.
▷Son Yang-hoon, professor of economics at Incheon National University=If the government does not raise electricity rates, there is a problem of diluting KEPCO’s deficit as a problem for everyone, rather than taking responsibility for those who use a lot of electricity or waste it. It’s not fair. There is no reason to hesitate to raise electricity rates.
▷ Minister Lee =Next year, there is a factor that will increase the electricity rate by more than 50 won per ㎾h. It is regrettable that the principle of price adjustment has not been established even though a good system called the fuel cost indexation system has been introduced. KEPCO’s large-scale deficit is ultimately the burden of the people. We will make a comprehensive judgment on the impact on the national economy and normalize electricity rates. And in New York, USA, an ordinance was recently passed imposing fines for insufficient energy efficiency per building. Korea also needs policy efforts to promote energy demand efficiency in the building sector in large cities. We will also strengthen demand efficiency in the building sector in cooperation with local governments such as the Ministry of Land, Infrastructure and Transport and the Seoul Metropolitan Government.
▷Jang Dong-han, professor of international trade at Konkuk University=in a crisis situation. Please introduce the government’s crisis management system.
▷ Minister Lee =The export strategy meeting is personally supervised by the president, and informal meetings in which the president and economy ministers discuss are also being actively utilized. The Ministry of Strategy and Finance and the Ministry of Industry are operating the export promotion team together to comprehensively manage export issues such as nuclear power and defense.
▷Kim Heung-jong, President of the Institute for International Economic Policy=Fertilizer is an important, but often overlooked, part of the supply chain. It is necessary to strengthen monitoring of several strategic products such as fertilizer.
▷ Minister Lee =Totally agree. I’ve had trouble with the number of elements, so I’m watching it all the time.
▷Lee In-sil, Director of the Korean Peninsula Future Population Institute=The industrial manpower mismatch is serious. How is the manpower plan for industrial transformation established?
▷ Minister Lee =It is necessary to come up with an immigration policy that can attract global talent. South Korea is one of the world’s 10th largest economies, but it is difficult to advance to the top 5 countries (G5) only with our brains. Korea should become a “melting pot” where global talents of various races and backgrounds gather. It is also necessary to actively review policies that grant permanent residency or nationality to foreign talent.
▷Kang In-soo, Professor of Economics at Sookmyung Women’s University=You presented the goal of exporting 10 nuclear power plants, is it realistic? The National Greenhouse Gas Reduction Target (NDC) was too unreasonable in the past administration.
▷ Minister Lee =Considering the Yoon Seok-yeol government’s will to nurture nuclear power plants and Korea’s nuclear power plant competitiveness, the government’s goal of exporting 10 nuclear power plants by 2030 is fully feasible. We are preparing a package strategy that covers the defense, construction, and infrastructure sectors that the ordering country of nuclear power plants is interested in. It is true that the NDC, which has decided to reduce greenhouse gases by 40% compared to 2018, has doubts about its feasibility. In the 10th Basic Plan for Electricity Supply and Demand, we are working to set realistic NDC goals, such as adjusting the new and renewable energy supply target from 30% to 21.6% by 2030.
▷ Hyun Jeong-taek, Chairman of Jeongseok Inha Academy =They say they will operate a fully autonomous vehicle in 2027, but given the regulatory reality in Korea, it will never happen.
▷ Minister Lee =The Ministry of Industry is looking for unnecessary regulations. The Ministry of Environment, Ministry of Land, Infrastructure and Transport and other ministries are also demanding that the regulations be removed. The Ministry of Industry will faithfully play the role of the deregulation team. The cargo union strike is also a bad practice that has become endemic in Korean society. When technological innovation and institutional innovation go hand in hand, growth will be promoted.
▷Jeong Kap-Young, former president of Yonsei University=How will Chip 4 (a semiconductor council proposed by the US to Korea, Japan, and Taiwan) respond?
▷ Minister Lee =The semiconductor industry really cannot be missed. I need to grow more, and I think of Chip 4 in that dimension. The US is strong in equipment technology, Korea in production technology, Taiwan in foundry, and Japan in materials and parts. If four people with well-divided roles sit down, there is an advantage in rapidly changing technology while significantly strengthening the semiconductor supply chain. We plan to use Chip 4 in a way that helps us. It is the idea that there is no need to exclude Chip 4 and that it should fully reflect our interests by participating. Chip 4 is carrying out various plans such as manpower training, technology development cooperation, and information exchange. It is designed to be unobtrusive to individual countries. Although no announcement has been made yet, behind the scenes work is being done by the four parties.
▷Former President Chung=We need to launch an energy conservation campaign comparable to the 1970 oil crisis, but the government’s efforts seem to be lacking.
▷ Minister Lee =Totally agree. The energy saving effect is one stone. Using less energy reduces the cost of building power plants and importing energy. Greenhouse gas emissions can be reduced, and transmission costs can also be reduced. We will develop stronger energy demand reduction policies.
▷Noh Dae-rae, former chairman of the Fair Trade Commission=It seems that the government or the political sphere is powering welfare and labor, and the voice of the Ministry of Industry is not heard well. There should be more policies that increase growth or productivity.
▷ Minister Lee =At every opportunity, he talks about the importance of industry within the government. It is true that developed countries around the world have lost interest in growth. However, since Korea is still a small country and trades with the rest of the world, more efforts are needed to grow.
▷Heo Yong-seok, President of Hyundai Economic Research Institute=In the United States, China, and Taiwan, the countries support the semiconductor industry by risking their fortunes, but aren’t we too negligent? The investment tax credit rate also seems to be lower in Korea than in other countries.
▷ Minister Lee =R&D investment is supported to a certain extent, but facility investment is low. The facility investment deduction rate for large corporations is only 1%. It’s a number I’m ashamed to put out. The tax authorities should raise the facility investment deduction rate for large corporations to a considerable level. Interest rate hikes must be offset. We need to get out of the frame of large and medium-sized companies (which gives low benefits to large companies and high benefits to small and medium-sized companies). If large corporations do not invest, there will be no SME investment.
Reporter Lee Ji-hoon/Kim So-hyun lizi@hankyung.com