Each company will build two new fabrication plants in the country's southwest as AI demand strains existing capacity
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A new semiconductor manufacturing hub in southwestern South Korea is set to receive a combined 800 trillion won ($520 billion) commitment from Samsung Electronics and SK Hynix, with each chipmaker pledging to construct two fabrication plants there as memory chip demand tied to artificial intelligence continues to outpace what current facilities can supply.
South Korean President Lee Jae Myung announced the initiative on Monday, framing it as part of a broader effort to expand the country's AI and semiconductor capabilities while distributing economic growth beyond the Seoul metropolitan area. "We must establish the core building blocks of artificial intelligence faster than any other country," Lee said. "Semiconductors, physical AI and AI data centers are the three pillars of our next great leap forward."
The two companies have pegged their individual contributions at approximately 400 trillion won apiece, or close to $260 billion each, according to The Wall Street Journal. Separately, chip-packaging infrastructure in the central part of the country is slated to receive 81 trillion won in additional investment. Samsung Chairman Lee Jae-yong said the southwestern city of Gwangju is a likely site for Samsung's new factories.
Chey Tae-won, who chairs SK Group and oversees SK Hynix, described the undertaking as one that would demand enormous parcels of land alongside reliable supplies of power, water and qualified engineers, according to ABC News. As a point of reference, he said that assembling SK Hynix's current semiconductor cluster in Gyeonggi Province was a nine-year endeavor. South Korea's minister of trade, industry and resources, Jung-Kwan Kim, said the government would move to shorten the timeline from licensing to construction.
The southwest initiative is one component of what the government is calling a nationwide semiconductor ecosystem. Beyond the southwest, the blueprint envisions the southeast taking on a larger role in producing chip components and materials, the Chungcheong region in the center of the country anchoring advanced packaging operations, and new data center construction spread throughout South Korea, according to the outlet.
Not everyone is convinced the southwest can support world-class chip manufacturing, according to The Journal. Detractors within the industry have pointed to the region's separation from established semiconductor supply networks and the difficulty of persuading top engineering talent to leave the capital. President Lee did not dispute the commercial logic of staying closer to Seoul, but framed equitable geographic growth as a government imperative and promised that fiscal incentives would help offset the tradeoff for the companies.
The two companies together produce roughly two-thirds of the world's memory chips. SK Hynix has emerged as the leading supplier of high-bandwidth memory chips to Nvidia $NVDA and overtook Samsung this week to become South Korea's most valuable listed company, a position Samsung had held for 26 years. SK Hynix is also seeking to raise approximately $29.65 billion through an American depositary receipt listing on the Nasdaq $NDAQ, with trading expected to begin July 10, with funds earmarked in part for expanding fabrication capacity in South Korea.
Monday's announcement sent both stocks lower, with Samsung Electronics dropping 4.8% and SK Hynix closing down 1.6% after clawing back from an earlier decline that had approached 6%.
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