South Korea expands subsidies for advanced chip packaging to ease HBM bottlenecks

South Korea’s Ministry of Trade, Industry and Energy on Wednesday detailed an expansion of subsidies and tax credits for advanced semiconductor packaging, including HBM stacking, silicon interposers, and high density substrates. The change aims to relieve chronic packaging constraints that have limited shipments of AI accelerators since 2023 and to keep more of SK Hynix and Samsung Electronics value chain inside Korea.

The ministry said advanced packaging lines are now eligible under the K Chips program, which offers investment tax deductions that can reach about 25 percent for large manufacturers and higher rates for smaller suppliers, along with policy loans from Korea Development Bank. The plan adds dedicated support for ABF class substrates and 2.5D and 3D integration, areas where Korea has lagged Taiwan and Japan.

The scope covers equipment and materials as well as assembly capacity. Domestic OSAT players such as Nepes and SFA Semicon, substrate makers including Simmtech, Daeduck, and Korea Circuit, and materials vendors such as SKC and Kolon are listed as priority beneficiaries, according to the ministry summary. Packaging equipment makers Hanmi Semiconductor and SEMES are also within scope, which could pull more of the interposer and through silicon via stack into the local ecosystem.

This is a direct response to the packaging gap exposed by the AI cycle. SK Hynix supplied most of the HBM that went into Nvidia systems in 2023 and 2024, while Nvidia relied heavily on TSMC CoWoS and ABF substrates from Ajinomoto and Taiwan PCB houses such as Unimicron and Nan Ya PCB. Korean brokerage research from NH Investment and Securities and Kiwoom Securities has for more than a year flagged interposer and substrate capacity as the gating factor for accelerator shipments, not memory die output.

The program aligns with the Yongin mega cluster build out, where the government backed packaging innovation center is running pilot test vehicles with universities such as KAIST and research institutes including ETRI. Samsung’s Device Solutions division, led by Kye Hyun Kyung, has said it will grow HBM and advanced packaging as core businesses, while SK Hynix chief executive Kwak Noh jung has tied HBM road maps to tighter integration with local substrate and equipment partners.

If Korea can lift substrate and interposer output at scale, the geographic concentration risk around TSMC CoWoS eases for US chip designers and cloud buyers, and bargaining power shifts across OSAT and substrate supply. It would also test how quickly national industrial policy can rewire the most constrained link in the global AI hardware stack.