Semiconductor Special Act Enforced in Full Force on the 11th… Era of Up to 100% National Support for Cluster Infrastructure
National Support System Activated via Presidential Special Committee and Special Account… Non-Capital Region Priority Designation Codified, 52-Hour Workweek Exception Excluded

The Special Act on Strengthening and Supporting the Competitiveness of the Semiconductor Industry (hereinafter referred to as the Semiconductor Special Act) and its enforcement decree, which embody a comprehensive national support system for the semiconductor industry, entered into full force on August 11. This comes approximately six months after the legislation was enacted and promulgated on February 10. Consequently, support measures ranging from the designation of semiconductor clusters, national subsidies for infrastructure costs, professional workforce development, and the operation of a dedicated special account have entered a stage of actual operation based on legal grounds.

According to the Ministry of Trade, Industry and Energy, the government deliberated and approved the enactment of the enforcement decree for the Semiconductor Special Act at a cabinet meeting on the 4th, and the decree took effect alongside the parent statute on the 11th. The enforcement decree materializes the matters delegated by the law, containing detailed regulations across four main pillars: the composition and operation of the Committee on Strengthening Semiconductor Industry Competitiveness, procedures and support details for semiconductor cluster designation, workforce development support, and the operation and management of the Semiconductor Industry Competitiveness Enhancement Special Account.

Regarding the approval of the enforcement decree, Minister of Trade, Industry and Energy Kim Jung-gwan stated, "Now that the legal foundation for the national support system of the semiconductor industry has been established, we will closely cooperate with relevant ministries to swiftly promote major policy tasks in accordance with the law." As the semiconductor industry accounts for approximately 40 percent of exports, the implementation of this legislation is expected to exert a significant ripple effect on the broader South Korean economy, which possesses an export-centric industrial structure.

Eight Months from Legislation to Implementation: Progress in Completing the Support System

The Semiconductor Special Act was pursued to establish a legal basis for the South Korean government to execute direct financial support in response to major economies—such as the United States with its CHIPS Act and the European Union with its Chips Act—drawing domestic semiconductor industries toward themselves through massive subsidies and tax benefits. Deliberations proceeded by integrating bills separately proposed by ruling and opposition lawmakers, passing the Legislation and Judiciary Committee of the National Assembly last December before crossing the threshold of the National Assembly plenary session in late January. It was subsequently promulgated on February 10, and with the completion of the enforcement decree's formulation, the schedule for implementation on August 11 has been finalized.

The framework of the legislation is largely summarized into five pillars. First, the establishment of the Presidential Committee on Strengthening Semiconductor Industry Competitiveness. Second, the designation of semiconductor clusters alongside the creation and support of infrastructure. Third, the expansion of industrial foundations such as electricity, water supply, and road networks. Fourth, the simplification of administrative procedures, including exemptions from preliminary feasibility studies and permitting support. Fifth, the establishment of the Semiconductor Industry Competitiveness Enhancement Special Account, operated temporarily until December 2036. Additionally, the act includes a clause requiring the formulation and implementation of a separate support plan for the foundry sector, which features a high proportion of small and medium-sized enterprises (SMEs).

Among these, the special account clause is cited by legal circles as the core of this legislation. Unlike general budget projects that are exposed to annual budget deliberation uncertainties, a channel has been created to stably secure semiconductor support funding through a dedicated account. From the perspective of the industry, this implies increased predictability in government support when formulating large-scale facility investment plans spanning multiple years.

Special Committee Led Directly by the President: A Pan-National Control Tower

The control tower was the first aspect detailed by the enforcement decree. The Committee on Strengthening Semiconductor Industry Competitiveness is a body chaired by the President to deliberate on major policies, including master plans and execution plans for strengthening semiconductor industry competitiveness, with the enforcement decree regulating matters pertaining to committee composition and operation. The Ministry of Trade, Industry and Energy explained that this will enable the systematic implementation of core policy tasks and secure pan-national momentum for policy advancement.

The structure in which the President directly chairs the committee is interpreted as a resolve to secure coordination capabilities that transcend inter-ministerial silos. It has been consistently pointed out that the creation of a semiconductor cluster involves not only industrial policy but also power supply, water resource acquisition, transportation networks including roads and railways, and education and workforce policies, making it difficult for a single ministry to handle. With the special committee overseeing everything from master plan establishment to cluster designation review, decision-making previously dispersed across individual ministries is now centralized into a single deliberative axis.

Furthermore, the enforcement decree stipulates procedures for establishing master plans and execution plans, the scope of semiconductor industry statistics compilation, and matters regarding delegation of duties, thereby equipping the policy establishment with a working-level foundation. Analysts suggest that institutionalizing the systematic compilation of industrial statistics is an understated yet crucial infrastructure clause, as it can enhance the ex-post verification of policy effects and the precision of target selection for support.

Cluster Designation Procedures Finalized… "Non-Capital Region Priority Considered" Codified

The aspect drawing the keenest attention from corporations is the designation procedure and support content for semiconductor clusters. According to the enforcement decree, applications for cluster designation must submit a development plan including basic objectives, development directions, name, location, and area, current status of the regional semiconductor industry and infrastructure, and matters concerning workforce development and research foundation establishment. Designations are initiated by the Minister of Trade, Industry and Energy upon application or ex officio, and are designed to undergo deliberation and resolution by the special committee.

In particular, the enforcement decree explicitly codified that priority should be given to regions outside the capital area when designating clusters. The objective is to foster a semiconductor ecosystem reflecting regional industrial conditions and characteristics while contributing to balanced national development. Amid an industrial geography where capital region concentration in semiconductors is pronounced, how the non-capital region priority principle translates into actual designation outcomes is expected to be determined during future special committee deliberation processes.

Potential targets for designation have also been broadly designed. Under the law, industrial complexes and specialized complexes for national high-tech strategic industries are mandatory designation targets, and legal analysis interprets that the enforcement decree has added free economic zones, materials, components, and equipment specialized complexes, R&D special zones, and opportunity development zones to the pool of eligible designation targets. Furthermore, the scope of supported enterprises has expanded, with legal experts interpreting that a pathway for business sites in the capital region to receive statutory support benefits has been established. In other words, it is a dual structure where priority for cluster designation is placed on non-capital regions, while the gateway to the support system itself remains wide open.

Infrastructure Costs Ranging from Half to Full Support… 100% for Redundancy and Supply Chain Facilities

The provision containing the most concrete figures in this enforcement decree pertains to infrastructure support. The creation and operation costs of industrial infrastructure necessary for clusters can be borne by the central and local governments within a range of 50 percent to 100 percent of total project expenses. It is structured to establish a lower limit where at least half is publicly funded, while leaving the upper limit open up to full support depending on the case.

Moreover, facilities contributing to redundancy, supply chain stability, and industrial safety were separately prescribed to receive full cost support. Semiconductor manufacturing processes possess characteristics where even a momentary disruption in electricity or water supply causes massive losses, making redundancy investments to secure alternative supply routes essential, yet posing a heavy burden on corporations. The Ministry of Trade, Industry and Energy stated its expectation that this measure will alleviate the infrastructure construction burden on corporations and more stably expand essential infrastructure for semiconductor production.

The infrastructure support provisions interlock with large-scale cluster initiatives currently under discussion, carrying practical significance. According to media reports, issues regarding massive power supply and industrial water acquisition are being handled as contentious points concerning non-capital region semiconductor cluster initiatives, alongside controversies raised over the economic feasibility of certain regional investment plans. As the determination of who bears financial burdens and support ratios emerges as a variable dictating the success or failure of individual projects, how cost-sharing among the central government, local governments, and corporations is designed within the 50 to 100 percent range presented by the enforcement decree is projected to be a key focal point.

Workforce Development and Special Accounts… The Significance of Institutionalized Financial Support

In the workforce sector, the enforcement decree stipulates that employment linkages for regional professionals at non-capital region semiconductor enterprises and retraining support can be implemented with priority. This is interpreted as a reflection of the critical awareness that even if clusters are prioritized in non-capital regions, effectiveness would diminish if workers ultimately flock to the capital area. Additionally, by regulating the designation criteria and procedures for specialized institutions in semiconductor workforce training, a framework has been established to systematically cultivate personnel matching industrial field demands.

On the financial front, detailed matters concerning the establishment and operation of the Semiconductor Industry Competitiveness Enhancement Special Account were prescribed. The law specifies that the special account shall be operated until December 2036, securing a mid-to-long-term financial channel for support spanning over the next decade and beyond. While the actual scale and revenue structure of the special account will be materialized during annual budgeting processes, the legalization of the account itself is evaluated as a device that mitigates the possibility of support fluctuating drastically due to changes in political administrations or economic cycles.

There is also an intersection with SME policy. The law stipulates the formulation and implementation of support plans for the semiconductor foundry sector, which has a high proportion of SMEs. This is interpreted as an intention to encompass SMEs and mid-sized enterprises in the foundry, backend packaging, and materials, parts, and equipment sectors within the policy target, moving away from support structures prone to favoring large integrated device manufacturers (IDMs) and a handful of conglomerates. The actual contents and execution speed of the support plan warrant monitoring subsequent work by the special committee and relevant ministries.

Departure Without the 52-Hour Workweek Exception… Remaining Issues and Diverging Views

This legislation was not completed without controversy from its initial conception stage. The provision applying exceptions to the 52-hour workweek limit for semiconductor R&D personnel—the most contentious issue during legislative deliberations—was ultimately excluded from the final law. Amid continuous strong opposition from labor unions, the clause was omitted during the National Assembly's Legislation and Judiciary Committee stage and failed to be included in the bill passed at the plenary session.

Perspectives surrounding this remain mixed. Some voices within the industrial sector express regret over the omission of flexible working hours for R&D personnel at a time when competition in advanced technology development is turning into a race against time. Conversely, labor unions and civil society have maintained counterarguments that institutionalizing long-term labor threatens workers' health rights and that extending working hours cannot serve as an intrinsic solution to technological competitiveness. As the working hours issue remains an independent labor legislation debate separated from this special act, related controversies are highly likely to persist.

Discussions surrounding the priority of financial support also remain. Concerns exist that large-scale financial injections into a specific industry could trigger equity issues with other industries, alongside prudent views that subsidy competition could become a source of global trade friction. Conversely, refutations are equally formidable, arguing that in a reality where semiconductors have become strategic assets directly tied to national security, production bases themselves could fracture without support matching the level of major nations. Observations suggest that the success or failure of this legislation will ultimately be decided by the precision and speed of execution, no less than the scale of support.

Semiconductor Bearing 40% of Exports… Implementation Coinciding with Super-Cycle Phase

The timing of the Semiconductor Special Act's implementation coincides, paradoxically, with a period when semiconductor exports are passing through an unprecedented boom phase. According to import and export trends for July announced by the Ministry of Trade, Industry and Energy on the 1st of this month, total exports for July increased by 62.8 percent year-on-year to $98.89 billion, recording the second-highest performance in history following June's $102.25 billion, which had surpassed $100 billion for the first time on a monthly basis. On a monthly basis, this marks the breaking of all-time highs for 14 consecutive months.

Leading this trend is decisively semiconductors. Semiconductor exports in July surged by 178.8 percent year-on-year to $41.01 billion, exceeding $40 billion for two consecutive months. Based on preliminary data compiled by the Korea Customs Service from July 1 through 20, semiconductors accounted for 40.3 percent of total exports. Aggregating monthly trends from the Ministry of Trade, Industry and Energy, cumulative semiconductor exports from January to July of this year reached the level of $23.33 billion, with analysts attributing the performance boost to expanding sales of high-bandwidth memory (HBM), server DRAM, and enterprise storage devices going into artificial intelligence servers. The July trade balance recorded a surplus of $30.32 billion, surpassing $30 billion for two consecutive months.

The operation of the support legislation during a boom period is dual-sided. Looking solely at immediate performance, the urgency of support may appear low; however, semiconductors are a quintessential cyclical industry, and preemptive investments during boom phases determine competitiveness in the subsequent cycle. Coinciding with fierce subsidy competition among major nations and AI-driven demand reorganization, right now is assessed as the prime timing for long-term investments in production bases, workforce, and infrastructure. On the 11th, the first day of implementation, political follow-up support discussions continued, such as the ruling party's Special Committee on Supporting Three Mega Projects holding an on-site meeting attended by executives from Samsung Electronics and SK hynix.

Checkpoints from a Corporate Practical Perspective

For exporting companies and firms within the semiconductor ecosystem, the practical implications of this implementation are clear. First, the door for cluster designation applications has opened. Businesses operating sites within industrial complexes or specialized complexes, or those reviewing relocation, need to closely monitor the development plans and designation application movements of local governments in their respective regions, as the burden of infrastructure costs and the speed of administrative procedures will vary depending on designation status.

Second, the reassessment of infrastructure investment plans. Since electricity and water supply redundancy, as well as facilities contributing to supply chain and industrial safety, can now be fully funded by the central and local governments, room has emerged to redesign infrastructure investments previously delayed due to cost burdens in linkage with the support system.

Third, workforce strategy. Companies with business sites in non-capital regions can receive priority application for employment linkage and retraining support for regional professionals, making it advantageous to formulate hiring and training plans in alignment with regional training institution designation trends.

Fourth, enterprises with business sites in the capital region are not outside the system. Legal analysis suggests that although priority for cluster designation lies in non-capital regions, the scope of supported enterprises is designed broadly enough for capital region sites to utilize statutory support channels; thus, preemptively reviewing support items applicable to one's own company is necessary. The period following the second half of the year, when the government's master plans, execution plans, and special account budget allocations materialize, is expected to serve as the golden time for practical preparation.

Outlook: Speed, Financial Resources, and Regions

While the framework of the system has been completed, the variables that will determine its success or failure begin now. The first variable is speed. Depending on how swiftly schedules ranging from the formation of the special committee and establishment of master plans to the first cluster designation proceed, the tangible perception of the system will differ. With major competing nations having entered subsidy execution years ago, many point out that moving rapidly beyond institutional refinement into the execution phase is key.

The second variable is financial resources. Although the vessel of a special account has been prepared, the scale of financial resources to be housed within it is determined during annual budgeting processes. Amid tax revenue conditions, fiscal soundness debates, and competition with other policy demands, whether semiconductor support budgets can be secured stably is put to the test.

The third variable is regions. As the non-capital region priority principle has been codified, fierce inter-regional competition to attract projects is highly likely to materialize, and voices are emerging that regional capabilities capable of absorbing infrastructure demands such as electricity and water, alongside verification of the feasibility of large-scale investment initiatives, must be executed in parallel.

What is clear is that semiconductor industrial policy has shifted a step further from individual project-level support to a legal-based national support system. In the South Korean economy, which relies on semiconductors for nearly half of its exports, whether this legislation implemented on August 11 translates into actual investments, employment, and changes in the regional ecosystem is projected to be primarily judged at the juncture when the special committee's first deliberations, cluster designations, and the special account's initial budget emerge.