Electricity and gas bills paid by semiconductor materials, parts and equipment firms will be included in the scope of the supply price linkage scheme from Dec. 3. The government presented the step, along with a 5 trillion won semiconductor fund, as a way to pass large companies' investment gains on to materials, parts and equipment suppliers. Still, the requirement that such costs account for at least 10 percent of supply payments and an exception clause based on agreement between the parties remain, prompting criticism that actual price reflection could hinge on negotiations.

Article 2, Item 12-2 of the Act on the Promotion of Mutual Cooperation Between Large Enterprises and Small and Medium Enterprises newly defines "major energy expenses." It refers to energy charges used in manufacturing goods when the cost is at least 10 percent of the supply price. Item 13 of the same article says supply prices should be adjusted in line with changes when major raw material prices or major energy expenses move by at least a proportion set through consultation. The two provisions take effect on Dec. 3 this year. The linkage scheme took effect in October 2023 and was fully applied from January 2024. Until now, it was limited to raw materials, excluding expenses such as electricity and gas bills.

The measure was included in the "growth strategy for mutual development between large and small and medium enterprises" jointly presented by relevant ministries at a meeting of ministers for economic affairs on Jan. 21. The government presented strengthening channels for returning outcomes from large companies to small firms as one of three key strategies. It bundled joint technology development, a performance-sharing scheme and an expansion of the supply price linkage scheme as the means. Incentives will be expanded for companies with strong linkage performance, including exemptions from ex officio investigations into contracting and subcontracting.

In connection with this, President Lee Jae-myung (이재명) said at the second public-private joint inspection meeting on mega projects on the 10th that growth outcomes in strategic industries should not remain only with large companies, and called for designing "growth for all" from the early stage of projects. The government will 추진 a 1 trillion won "Grow Together Project" over 10 years in which large and small firms participate together from technology development to mass production. It will also provide a new semiconductor fund of about 5 trillion won to invest in promising materials, parts and equipment firms and fabless companies, and supply 5 trillion won in mutual growth trade finance.

◆"Subcontractors with weak bargaining power cannot reflect cost increases"

But the linkage scheme can be excluded if the parties to a transaction agree. Article 21(3) of the act sets exceptions in cases where the contractor is a small business, the transaction period is within 90 days, and the supply price is 100 million won or less, along with cases where both parties agree not to apply linkage. The National Assembly Budget Office pointed to an ongoing problem in which subcontractors with relatively weaker bargaining power in transactions cannot properly reflect cost increases in supply prices.

Views also diverge on the same system. According to the budget office, when asked why they did not reflect the subcontract price linkage scheme in contracts, prime contractors most often cited "agreement with subcontractors" at 65.4 percent. Subcontractors' top answer to the same question was "lack of understanding of the system" at 40.6 percent. In a fact-finding survey by the Ministry of SMEs and Startups, "sufficiently being adjusted" accounted for 31.4 percent as the reason for an agreement not to link.

The government also acknowledges this dynamic. The mutual growth strategy states that there is a need to supplement the weak bargaining power of individual small firms. It said it will 추진 an amendment to the Small and Medium Enterprise Cooperatives Act in the first half of 2027 so that cooperatives can have the right to request consultations and negotiate transaction conditions with large companies. The point at which a channel opens for cooperatives to act on behalf of firms comes later than the implementation of energy-expense linkage.

Ultimately, for a cost to qualify for linkage, it must account for at least 10 percent of the supply price. According to the budget office, in a 2024 survey, the share of subcontractors that responded that major raw materials meet this standard was 12.5 percent. As the same standard applies to energy expenses, the scope of application will differ depending on how many processes have electricity bills that exceed 10 percent of the supply price.

In addition, even if the system exists, a reason for not signing an agreement is the burden of disclosing costs. In the 2024 survey, the top reason for not concluding a linkage agreement was "not wanting to provide cost information to the contractor" at 45.7 percent. The system itself lacks a framework for providing credible price indicators, leaving transaction parties to directly negotiate both the standards for price changes and the linkage formula. Overseas cases show that in Japan, the government provides reference points. The Japan Small and Medium Enterprise Agency publishes an energy price index and crude oil CIF prices, and includes labor costs in adjustment items in addition to raw material and energy costs.

For materials, parts and equipment firms, the measure means they must consider two different issues. The 5 trillion won fund and trade finance are funds executed by the government. Whether linkage applies is determined by agreement between individual companies, as the budget office explained. The level of sanctions is also not heavy enough to change the negotiating dynamic. Measures under the act are corrective actions and requests for improvement by the minister of SMEs and startups. An industry official said, "It is difficult to think about negotiating individually," adding, "For now, before implementation, we plan to delay long-term contracts and only check whether the linkage scheme applies."

The fact that the basis for confirming outcomes is still thin adds to companies' concerns. According to the budget office, of 97,726 total transactions involving 113 companion companies, 27.3 percent were subject to mandatory application, and the agreement conclusion rate among them was 71.6 percent. Adjustment performance in the first quarter of 2025 was tallied at about 20 billion won. The budget office analyzed that this scale alone makes it difficult to confirm the rate of compensation for cost increases or improvements in subcontractors' profitability.