South Korean Tech Giants Plan $518 Billion Chipmaking Hub Amid AI Demand

Samsung Electronics and SK Hynix announced Monday they will invest a combined 800 trillion won ($518 billion) to establish a new computer chipmaking hub in southwestern South Korea. The initiative aims to capitalize on the surging demand for semiconductors driven by artificial intelligence.

This investment aligns with the South Korean government's strategy to foster industrial development outside the greater Seoul metropolitan area, the nation's economic hub and the heart of its semiconductor industry. The southwest region, which has historically lagged in economic development and lacks major industrial centers, has been identified as a focal point for this expansion.

Samsung and SK Hynix, collectively responsible for approximately two-thirds of the world's memory chip production, plan to each build two fabrication plants in the southwest. This expansion moves beyond their existing manufacturing facilities located in Gyeonggi Province, south of Seoul.

Samsung Chairman Lee Jae-yong stated that the company's new fabrication plants would be located in Gwangju, a city in the southwest where potential sites, including the grounds of a military air base slated for relocation, have been proposed.

While the companies have not specified completion timelines for the new southwestern facilities, SK Hynix Chairman Chey Tae-won noted that such a large-scale project would require extensive land, along with adequate power, water, and a skilled workforce. He likened the undertaking to SK Hynix's nine-year effort to establish its major manufacturing cluster in Gyeonggi Province, emphasizing the necessity of significant expansion to meet global demand.

South Korean government officials addressed concerns regarding the region's capacity for power and water, highlighting the area's strength in renewable energy as a potential advantage for chipmakers facing increasing global pressure to adopt cleaner electricity sources.

Both Samsung and SK Hynix have recently reported record profits, fueled by a global surge in investment in data centers and other AI infrastructure, which has driven demand for memory chips. Government officials and industry experts anticipate continued growth in AI-driven demand as the technology integrates into areas such as AI-powered industrial robots and autonomous vehicles. The current manufacturing capacity in Gyeonggi Province may approach its limits sooner than anticipated.

During the announcement event, government officials detailed plans for a nationwide semiconductor ecosystem. This includes expanding production of chip components and materials in existing southeastern manufacturing hubs, specializing in chip packaging in the central Chungcheong region, and establishing data centers across the country.

President Lee Jae Myung emphasized the importance of this development, stating, “We must establish the core building blocks of artificial intelligence faster than any other country. Semiconductors, physical AI and AI data centers are the three pillars of our next great leap forward."