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South Korea will provide tax incentives and financial support to corporate projects to develop eight key parts and materials, such as automotive chips and rare-earth permanent magnets used for electric vehicles.
The country plans to support investment in research & development (R&D) on those items over the long term.
Finance Minister Hong Nam-ki said the move will help attract private investments worth 140 billion won by 2025 and create jobs.
South Korean automakers have been forced to temporarily suspend their production lines due to the global shortage of automotive chips.
While South Korea is home to memory chip powerhouses Samsung Electronics Co. and SK hynix Inc., it has not produced less profitable auto chips.
The companies have also relatively lagged in developing non-memory chips, including system chips.
