The government has introduced a 'Domestic Production Tax Credit' (Korean-style IRA) as part of this year's tax reform plan, but the impact varies significantly across industries. While advanced manufacturing sectors like semiconductors and batteries anticipate profit improvements, the AI data center (AIDC) and finished car industries face mixed prospects depending on the scope of the reforms.
According to government and industry sources, the semiconductor sector is expected to be the primary beneficiary of the tax reform. Tax incentives, which previously focused on facility investments and research and development (R&D), have been significantly expanded to directly reduce corporate taxes based on 'product shipment and sales performance' after factory operations begin. Samsung Electronics and SK Hynix are investing hundreds of trillions of won in expanding production infrastructure at key sites, including the Yongin semiconductor cluster and facilities in Pyeongtaek and Cheongju. They are projected to secure long-term corporate tax reductions for at least 10 years starting next year, easing the burden of large-scale investments and improving cash flow.
The secondary battery industry is also expected to see tangible benefits. As production and sales volumes increase, the tax credit will grow, reducing the operational burden for domestic plants of the three major battery companies: LG Energy Solution, Samsung SDI, and SK On. With key production bases located outside the capital region, such as in Ochang, Ulsan, Cheonan, and Seosan, they will also benefit from a preferential tax credit rate of up to 1.5 times. However, the exclusion of a direct refund system means that unprofitable companies may struggle to take immediate advantage of these benefits.
In contrast, the AI data center sector, a core component of the AI industry, is unlikely to feel the effects of the tax reductions from this reform. The tax credits are primarily focused on manufacturing hardware, such as AI robot components, while the substantial costs associated with building and operating data centers are excluded from the credit categories. As a result, the limited direct benefits for IT and cloud companies are seen as inadequate given the massive capital investments required.
The finished car industry faces a more complex situation regarding the tax benefits. The initial expectation that 'electric vehicle finished products' would be included in the domestic production tax credit has not materialized, significantly reducing direct tax support for the finished car sector. However, the government has adjusted the limits for corporate deductions on passenger vehicles, reducing the cap for internal combustion engine vehicles to 7 million won while increasing it to 10 million won for electric and hydrogen vehicles.
This year's tax reform plan has been tailored to provide targeted support for advanced and strategic industries, leaving domestic industries such as retail, logistics, and general services in a policy shadow. The expansion of tax credits is limited to items classified as 'national strategic technologies' under the Special Tax Treatment Control Act, sidelining the voices of traditional industries that have continuously called for relief from energy and labor costs.
Meanwhile, Deputy Prime Minister and Minister of Economy and Finance Ku Yun-cheol stated on August 3, "We will actively support domestic production of strategically important items for economic security and green transition, and guide market funds into productive sectors of the industrial ecosystem."
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.