By Kwanwoo Jun


South Korean semiconductor stocks rallied Wednesday after the government's plan to offer bigger tax breaks for chip makers in 2023.

Shares in Samsung Electronics Co. and SK Hynix Inc. jumped more than 4% and 7%, respectively, outperforming the benchmark Kospi's gain of about 1%.

The world's two biggest memory-chip makers rose sharply after Seoul's Finance Ministry said Tuesday that it will allow large semiconductor companies to get a tax credit for a combined 25% of their total investment at home--15% of facility investment and 10% of extra investment--this year, much bigger than the recently adjusted 8% ratio.

The ratio will go even higher, to 35%, for smaller semiconductor companies, the ministry said.

The government's planned tax break, which still requires the legislature's approval, will lower tax bills sharply for the chip makers, according to Seoul-based Narasalim research institute, which closely monitors the country's fiscal policy. A tax credit for just 15% of investment would bring an extra income of 4.7 trillion won ($3.67 billion) to Samsung Electronics and KRW1.1 trillion for SK Hynix, it said Wednesday.

SK Hynix climbed as much as 7.4% to KRW81,200 in morning trading, the sharpest intraday gain in almost two years, and Samsung Electronics rose up to 4.7% to KRW58,000, the steepest intraday gain in more than a year, according to FactSet.

The semiconductor industry is a key driver of South Korea's economic growth. Memory chips accounted for 20% of the country's total exports in 2022.


Write to Kwanwoo Jun at kwanwoo.jun@wsj.com


(END) Dow Jones Newswires

01-04-23 0015ET