According to a research report published in South Korea, South Korean chaebolSamsung Electronics (ADR) (SSNGY.US) $Samsung OEM, a chipmaker, needs more government support in order to effectively communicate with$Taiwan Semiconductor Manufacturing Co Ltd (TSM.US) $Competition. Samsung and Taiwan Semiconductor Manufacturing Co Ltd are the only two contract chipmakers in the world that can make semiconductors with advanced manufacturing technology, and the latter is a market leader, with most of the world's orders going to their factories.
The report, released by the Korea Economic Research Institute related to the Chamber of Commerce, points out the main differences between South Korea and Taiwan, such as low taxes and low wages, to establish the argument that Samsung needs help to compete with Taiwan Semiconductor Manufacturing Co Ltd.
According to the report, Taiwan Semiconductor Manufacturing Co Ltd pays lower salaries and tax rates than Samsung, and they also focus on the differences between Taiwan Semiconductor Manufacturing Co Ltd and South Korea and analyze TSMC's position advantage. The conclusion outlines several factors beneficial to Taiwan Semiconductor Manufacturing Co Ltd, such as employee salaries, tax rates and a stable pool of engineers to choose from.
Over the years Taiwan Semiconductor Manufacturing Co Ltd has greatly increased his technical strength and market share compared with his peers and has a significant advantage over Samsung especially when the latter entered the field of chip manufacturing after Taiwan Semiconductor Manufacturing Co Ltd.
The Korea Economic Research Institute believes that South Korea's 25 per cent corporate tax rate is significantly higher than the 20 per cent Taiwan Semiconductor Manufacturing Co Ltd must deal with in Taiwan and will remain high despite lobbying efforts to reduce it to 22 per cent. The research firm says high tax rates are only a problem for Samsung because it also faces an unfavorable environment for R & D spending.
To establish this argument, it said that although Taiwan Semiconductor Manufacturing Co Ltd received a 15 per cent tax credit for R & D investment, a 40 per cent package cost credit and more benefits for engineers on his team, but Samsung must cover itself and a 1 per cent facility investment tax credit with a 2 per cent R & D tax credit.
However, the company pointed out that while these tax credits are the current situation, the passage of the National Advanced Strategic Industry Law, which will take effect this month, will provide a level playing field for tax credits. The bill would increase the R & D tax credit to 30% to 40% and the facility investment credit to 6%. As a result, it will provide Korean companies with a significant advantage over their Taiwanese counterparts.
However, even if the tax rate will become favorable, Taiwan Semiconductor Manufacturing Co Ltd has other advantages to help him stand out in the industry. Last year, Taiwan Semiconductor Manufacturing Co Ltd employees earned an average of 9500 million won, while Samsung employees earned an average of 144 million won, according to the research firm. In addition, Taiwan Semiconductor Manufacturing Co Ltd has a strong workforce, training 10000 semiconductor engineers in Taiwan last year, compared with just 1400 in South Korea.
Samsung and Taiwan Semiconductor Manufacturing Co Ltd are currently competing to bring 3nm chip manufacturing process nodes to market, although the former quickly announced mass production earlier this year, but it is unclear whether they have successfully won any large orders for the technology. Manufacturing chips is a costly process, and large orders enable companies to quickly recoup costs and turn investments into profits.