[Why&Next]① Display Crossing the Threshold of National Advanced Industries... Tax Benefits Are Key

'Korean Display, Is It Alright Like This?'
Government Focused on Semiconductors, Display Finally Selected as a 'National Advanced Strategic Industry'
Korea Loses Top Spot... Struggling Against China on a 'Tilted Playing Field'
Tax Benefits Unclear... Private Investment Must Be Encouraged Through Revision of the Special Tax Treatment Control Act

Editor's NoteJust over a decade ago, the display industry proudly served as the world's top export driver. However, its status has been steadily declining due to low-cost competition from China and a global complex crisis. The government, belatedly sensing the crisis, designated the display industry as a 'national advanced strategic technology' and began providing support. Yet, compared to China's display industry, which is recognized as a core national project and receives full-scale backing, Korea's support remains woefully insufficient. We have listened to industry voices on measures to sustain the high value-added display industry that will bear Korea's present and future.

[Asia Economy Reporter Han Yeju] A ray of hope has emerged for Korea's domestic display industry, which has been competing with China on a 'tilted playing field.' The display industry has been 'finally' designated as a national advanced strategic industry. This is interpreted as a recognition that comprehensive government-wide support is necessary as China's display rise accelerates and begins to surpass Korea. The industry emphasizes expanding tax credits for research and development (R&D) and facility investments to enhance the effectiveness of private investment. In particular, they unanimously call for revising the Restriction of Special Taxation Act (RSTA) to counterbalance China's display industry, which receives full government support.

According to the industry on the 11th, the government recently designated new display technologies as 'national advanced strategic technologies' alongside semiconductors and batteries (secondary cells) under the Special Measures Act on Strengthening and Protecting National Advanced Strategic Industries (National Advanced Strategic Industry Act). Included in display are organic light-emitting diode (OLED) panels, quantum dot (QD), microLED, and nano LED technologies.

The display industry, though younger than other manufacturing sectors, is among the fastest evolving industries technologically. Starting with cathode ray tubes, technology evolved to liquid crystal displays (LCD) and OLEDs, and now advances to foldable, rollable, and stretchable displays. Korea stands at the center of global display technology development. Since successfully commercializing OLED first in the world in 2007, Korea has written a history of 'world firsts.' The launch of OLED smartphones, 55-inch OLED TVs, and 55-inch transparent OLEDs all carry the label 'world first,' leading the global display market.

Accordingly, the display industry has been regarded as a core industry and one of the export engines of Korea. As of 2020, the display industry's share of the gross domestic product (GDP) was 4.4%, and last year's display exports amounted to $22.5 billion (approximately 28.2 trillion KRW), accounting for 3.3% of total exports.

[Photo by Samsung Display]

However, the current domestic display market has lost its world number one position to China’s low-cost offensive. While government policies and budget support have been concentrated on semiconductors, neglecting the display sector, China has used massive government subsidies to expand capacity and aggressively capture the LCD market.

According to the Korea Display Industry Association and market research firm Omdia, Korea’s display market share (33.2%) was already overtaken by China (41.5%) last year. Under government neglect, Korea’s market share has not rebounded even once in five years since 2017. This marks the first time in 17 years since 2004, when Korea led the world by surpassing Japan. Exports, which exceeded $30 billion until 2014, fell to $21.4 billion last year.

Korea also offers tax benefits for R&D and facility investments and supports workforce development, but these are minimal compared to China. This is why the industry says it is 'struggling to compete with China on a tilted playing field.'

In this context, the designation of the display industry as a strategic industry is somewhat late but welcomed by the industry. Being designated as a strategic technology means receiving policy support and protection in areas such as workforce, technology development, finance, and regulatory easing.

However, experts believe that since the level of tax benefits under the National Advanced Strategic Industry Act is unclear, incentives for private investment should be strengthened through amendments to the RSTA. The Ministry of Economy and Finance announces amendments to the RSTA enforcement decree annually, and it is argued that the scope of tax credits for R&D and facility investments, including display, should be expanded to enhance the effectiveness of private investment.

The RSTA applies different tax credit rates based on the importance of technology: ▲national strategic technology ▲new growth and source technology ▲general technology. National strategic technologies receive up to 50% tax credit on R&D and 16% on commercialization facility investments (for SMEs). While semiconductors and batteries are included as national strategic technologies under the RSTA, display is excluded and classified as new growth and source technology.

The display industry stresses that to promote next-generation technology development and facility investment, the RSTA should be amended to classify display as a national strategic technology. An industry official said, "Display is also a large-scale equipment industry, so investment is not easy relying solely on corporate capabilities. While our investment stalled, China’s offensive continued, leading to China becoming the number one display industry." He added, "Display should be included as a national strategic technology under the RSTA to expand tax support for R&D and facility investments."

This content was produced with the assistance of AI translation services.