Swift Legislation of the Semiconductor Special Act to Resolve Labor Hour Regulations and Mid-to-Long-Term Tasks

1. Introduction: The Formation of the Policy Agenda Surrounding the Semiconductor Special Act

Korea’s semiconductor industry is currently facing multiple, overlapping challenges, including the designation of Korea as a “sensitive country” by former U.S. President Donald Trump, a slowdown in global demand, supply-chain instability, and intensified competition from latecomer countries. In response, the government and both ruling and opposition parties have been discussing legislation to enact a “Semiconductor Special Act” aimed at strengthening industrial competitiveness and fostering innovation-driven growth. However, the legislative process has encountered significant obstacles.

On Thursday, March 13, deliberation on the Semiconductor Special Act was postponed during a plenary session of the National Assembly, resulting in prolonged legislative stagnation due to disagreements between the ruling and opposition parties.

The central point of contention concerns whether to relax the 52-hour weekly working-time cap for semiconductor research and development (R&D) personnel. To remain competitive in the global technology race, greater flexibility in working hours for R&D staff is widely viewed as necessary. The People Power Party argues that flexible working-hour arrangements for semiconductor R&D personnel are essential, while the Democratic Party has maintained its position that no exemption from the 52-hour workweek should be included.

Amid this standoff, the government announced on Wednesday, March 12, a supplementary measure expanding the approval period for special extended work authorization. Under this system, when extended working hours beyond the statutory limit are deemed unavoidable, overtime of up to 64 hours per week may be permitted with worker consent and approval from the Minister of Employment and Labor. The approval period was extended from three months to six months. Industry groups, including the Korea Chamber of Commerce and Industry and the Korea Economic Association, welcomed the government’s proposal to improve the special extended work authorization system for semiconductor R&D.

The most recently submitted Semiconductor Special Act bills currently under committee review differ by party. The ruling party’s bill was introduced by Rep. Koo Ja-geun (Bill No. 6153, December 3, 2024), while the opposition-led bill was proposed by Rep. Kim Jong-min (Bill No. 6794, December 20, 2024). A comparison of these bills alongside the government’s semiconductor policy measures is presented in the table below.

Against this backdrop, this issue report aims to:

examine the current state of the global semiconductor market;

assess the condition and challenges of Korea’s semiconductor industry;

compare semiconductor support policies across major countries; and

propose the prompt passage of the Semiconductor Special Act and identify short- and medium-term legislative priorities to enhance Korea’s global competitiveness.

2. The Current State of the Global Semiconductor Industry
◩ Market Trends: Korea’s Global Market Share Falls Sharply from 23.6% in 2018 to 13% in 2023

Semiconductors are core components that perform essential functions—such as computation, control, transmission, conversion, and data storage—in electronic devices. The semiconductor industry encompasses not only chip manufacturing but also upstream industries such as equipment and materials. Semiconductors are broadly divided into memory semiconductors (data storage) and system semiconductors (data processing), with the market size ratio estimated at roughly 3:7 by revenue (Kim Yang-pyeong, 2022).

Korea’s semiconductor production value continued to grow, reaching KRW 26 trillion in 2000, KRW 61 trillion in 2010, KRW 159 trillion in 2020, and KRW 224 trillion in 2022. However, Korea’s global market share, which had risen from 7% in 2000 to 14% in 2010 and peaked at 24% in 2018, began to decline sharply. After falling to 18% in 2019, Korea’s share dropped further to 13% in 2023. By segment, as of 2021, Korea’s global market share stood at 59.1% in memory semiconductors and only 3.0% in system semiconductors.

Comparisons of semiconductor sales and global market share among major countries show that the United States maintains the largest share at approximately 50%. Korea ranked second, briefly recovering to around 20% in 2021, but has since experienced continued decline. Korea’s semiconductor sales amounted to approximately USD 116.6 billion in 2021, about 40% of the U.S. level. While Korea has historically expanded its dominance in memory semiconductors—surpassing Japan in 2013—Taiwan has increased its market share through the growth of foundry giant TSMC, rising to 8.3% in 2021, up 3 percentage points from 2018. Over the same period, Korea’s share fell by 3.8 percentage points.

◩ Growth Outlook for the Global AI Semiconductor Market

Driven by advances in AI, IoT, and autonomous vehicles, new industries are emerging and market demand is expanding. In particular, the AI semiconductor market is expected to grow rapidly. According to Gartner, the global AI semiconductor market is projected to expand from USD 15.3 billion in 2020 to USD 34.3 billion in 2023, and further to USD 119.4 billion by 2027—approximately 7.8 times the 2020 level.

Samil PwC Management Consulting (2024) notes that most AI processor developers operate as fabless firms without manufacturing facilities, making advanced foundry capabilities critical. As a result, Taiwan’s TSMC is expected to continue benefiting from this trend. To compete effectively, Korea must strengthen advanced process technologies and investment capacity in the foundry sector.

3. Assessment of Korea’s Semiconductor Industry and Key Challenges
◩ Declining Export Share and the Competitiveness Gap Between Memory and System Semiconductors

Korea remains competitive in memory semiconductors, holding the world’s largest market share of around 60%. However, its export share fell from a peak of 29.1% in 2018 to 18.9% in 2022, dropping from first to second place amid growing competition from China. In contrast, system semiconductors account for 60–70% of the global semiconductor market, yet Korea’s share remains at only about 3%, limiting its overall global presence (Park Jae-young, 2022).

According to a Delphi survey conducted by the Ministry of Trade, Industry and Energy and the Korea Institute for Industrial Economics and Trade (2021), Korea’s overall semiconductor competitiveness scored 71 out of 100, with 87 in memory semiconductors and 63 in system semiconductors. By comparison, the United States scored 96 overall, China 74, Taiwan 79, and Japan 78. While Korea is a global leader in memory chips, it was rated weakest in system semiconductors, highlighting a significant structural imbalance.

◩ Fragile Non-Memory Ecosystem and Weak Global Position in AI Semiconductors

Korea has yet to establish a strong foothold in the system semiconductor sector. While the United States dominates CPUs, APs, and GPUs, China competes aggressively on price, and Taiwan leads in foundry services. Korea’s non-memory ecosystem is highly concentrated: in 2022, the top three companies—Samsung Electronics (73.9%), SK hynix (5.9%), and LX Semicon (11.2%)—accounted for over 90% of total non-memory semiconductor sales, reflecting a narrow industrial base (Samil PwC, 2024).

Although some Korean firms have commercialized AI semiconductors for on-device applications, and data-center-focused firms are advancing toward commercialization, Korea’s AI semiconductor technology level is estimated at 80% of that of the United States, with a technology gap of approximately 2.5 years (Korea Eximbank, 2024).

◩ Shortages of Skilled Personnel and Weak Foundations for R&D and Talent Development

The government projects demand for approximately 127,000 new semiconductor professionals over the next decade, yet current supply through vocational schools and universities is estimated at only about 5,000 graduates annually (Inter-ministerial Task Force, 2022). Researchers attribute this shortage to prolonged reductions in government R&D investment since the 2010s, which weakened the domestic R&D ecosystem and talent pipeline.

4. Comparison of Semiconductor Support Policies in Major Countries

Semiconductors have become central to technological leadership and national security, prompting major economies to implement aggressive support measures.

The United States enacted the CHIPS and Science Act in 2022, allocating USD 278.2 billion for basic science, semiconductor manufacturing incentives, tax credits, R&D, and ecosystem development. China has pursued large-scale national semiconductor funds and integrated industrial policies since 2014. Japan revised its semiconductor and digital strategy in 2023, committing substantial public investment and subsidies. Taiwan continues to strengthen its manufacturing base, R&D support, and talent development through coordinated public–private initiatives.

Korea enacted the Special Act on National Advanced Strategic Industries in 2022 and introduced the “K-Chips Act” in 2023 to expand tax credits for strategic technology investments. However, compared with major competitors, Korea still lacks large-scale production subsidies, a dedicated national semiconductor fund, and comprehensive R&D grant programs.

5. The Need for Swift Passage of the Semiconductor Special Act and Medium-Term Policy Tasks

Given the intensifying global competition surrounding semiconductors—a cornerstone of national competitiveness—the swift passage of the Semiconductor Special Act within March is imperative. The legislation should include provisions to ease labor regulations for R&D and production personnel across design, manufacturing, and supply-chain functions.

As medium-term priorities, this report proposes:

expedited construction of infrastructure for advanced system semiconductor clusters through supplementary budgets;

expanded funding for AI semiconductor R&D;

active use and refinement of regulatory sandboxes for advanced industries; and

relaxation of regulations on establishing and expanding semiconductor-related academic programs, including temporary special enrollment quotas.

Korean version: https://www.cfe.org/bbs/bbsDetail.php?cid=issue&pn=1&idx=27413