Samsung Electronics and SK Hynix are unlikely to gain substantial benefits from the upcoming Korean version of the Inflation Reduction Act (IRA), which will be reviewed by the National Assembly on the 16th. Analysts suggest that the companies' export-oriented production structure and the exclusion clause for investment tax credits will limit the actual amount of credits they can claim. In contrast, LG Electronics, which is set to begin mass production of robot actuators, is expected to qualify for significant tax credits depending on the designation of specific items.
According to the National Assembly and industry sources on the 15th, the National Assembly's Finance and Economy Planning Committee's tax subcommittee will discuss a proposed amendment to the Tax Special Cases Restriction Act, which aims to establish domestic production tax credits. The proposal would allow companies that manufacture and sell designated items domestically to receive reductions in corporate taxes based on their production and sales performance.
The government has designated six sectors for tax incentives in its tax reform plan this year: solar power, wind power, secondary batteries, semiconductors, key materials, and AI robot components. This initiative aims to prevent the relocation of production bases in high-tech industries that hold strategic value, while also reducing reliance on foreign supply chains through tax support in response to U.S. subsidy and tariff pressures.
However, the production structure of the memory industry poses challenges. Samsung Electronics and SK Hynix supply most of their DRAM and NAND products to overseas clients, making it difficult to meet the 'domestic sales' requirement. Additionally, items produced in facilities that have received integrated investment tax credits are generally ineligible for domestic production tax credits.
The concentration of new semiconductor fabs in the Yongin semiconductor cluster and the southwestern region means that preferential treatment for non-capital region metropolitan cities (1.1 times) or areas experiencing population decline (1.5 times) may not yield immediate benefits. Yongin overlaps with existing tax credits, and the southwestern region will not have any eligible production until new fabs are operational in 2-3 years. Furthermore, the method for calculating domestic expenditure ratios and production costs has been postponed to implementation regulations, which could raise the bar for companies if detailed criteria are set strictly.
In anticipation of the tax subcommittee's review, the business community is calling for improvements to the system. The Korea Chamber of Commerce and Industry submitted a legislative proposal to the National Assembly last month, requesting that eligible items produced domestically be exempt from sales area restrictions and that the limitations on overlapping integrated investment tax credits be eased. They also urged that companies suffering losses due to large-scale investments be allowed to receive direct refunds or third-party transfers.
On the other hand, LG Electronics, which is focusing on the AI robot components sector, has high expectations for benefits. The company plans to produce nine types of actuators for robots at its facility in Changwon, Gyeongnam, and supply them to domestic robotics and logistics companies starting next year. This aligns perfectly with the core requirement of 'domestic production and domestic sales.' Since these actuators account for 60% of robot costs, receiving tax benefits could reduce initial mass production costs and enhance price competitiveness.
An industry insider stated, "Considering the export proportion of key industries like semiconductors, it is urgent to readjust the requirements. While it is encouraging that the robot sector, a new growth driver, is included, we need to see how many core components will be included in the detailed items set by presidential decree."
* This article has been translated by AI.
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