South Korea taps Samsung, SK Hynix in $576-billion AI chip drive to cement global leadership

SEOUL, South Korea – South Korea on Monday, June 29, laid out a sweeping industrial strategy centered on semiconductors and artificial intelligence, as President Lee Jae Myung unveiled over $576 billion in chip investment to secure global dominance and rebalance growth.

The plan, anchored by Samsung Electronics and SK Hynix, marks Lee’s boldest push yet to align South Korea’s AI and chip ambitions with his pledge to narrow regional disparities and revive economies beyond the Seoul metropolitan area.

Flanked by the chiefs of the world’s two biggest memory chipmakers, Lee cast the initiative as a “great leap forward,” centered on the “triple axis” of semiconductors, physical AI and data centers.

“We must secure the core elements of AI faster than any other country,” the president said in a televised address.

Samsung and SK Hynix will invest 800 trillion won ($518.30 billion) to build two new chip fabrication sites each in South Korea’s southwest region, industry minister Kim Jung-kwan said.

Lee said the country’s southwestern city of Gwangju and South Jeolla province will also invest 5-20 trillion won in the projects. A further 81 trillion won is expected for a chip packaging cluster in the Chungcheong area near Seoul.

“To meet the rapidly increasing demand for semiconductors, we need to quickly complete the production hubs that are currently under construction,” Lee said.

“At the same time, we must secure overwhelming production capacity in advance through large-scale new investments, including in the southwestern region. Existing sites centred around Yongin and Pyeongtaek have already reached their limits.”

Lee said the southwest will host major chip production clusters, drawing on abundant, underused power.

Industry experts say diversifying chip investment beyond Seoul could ease infrastructure bottlenecks, but warn that building cutting-edge fabs requires vast electricity and water, advanced logistics, deep supplier networks and highly skilled labour – elements that may not scale quickly enough in a new region to meet surging AI demand.

“To execute something of this magnitude properly requires an extraordinary amount of deliberation. I am sure there has been extensive internal review, but from the outside, it still appears to be moving too fast,” said Lee Jong-ho, a professor at Seoul National University’s Department of Electrical and Computer Engineering.

“It would be ideal if demand remained strong for the next 20 or 30 years, but no one can know that with certainty…If demand were to decline, the consequences would be severe.”

HBM chips give pole position in AI race

South Korea is emerging as a major winner from the surge in global AI investment, driven by Samsung Electronics and SK Hynix’s commanding position in high-bandwidth memory (HBM) chips essential to advanced AI processors.

Their grip on HBM supply has made them central to the global push to develop more powerful AI systems. Both companies operate large semiconductor hubs in the Seoul metropolitan area.

Industry minister Kim also said the country will double dynamic random-access memory (DRAM) output within five years by bringing forward construction of fabs in the Seoul metropolitan area to the mid-2030s.

DRAM is a type of memory that is used to power electronics such as laptops and smartphones and HBM is produced by stacking multiple layers of DRAM.

Samsung Electronics Chairman Jay Y. Lee said at the event the company had selected Gwangju as a site for its new chip cluster, while SK Hynix’s Chairman Chey Tae-won said the firm needed more time to finalise a site and secure infrastructure in the southwestern region.

“It took us nine years for us to create a cluster in Yongin. Also, a chip factory requires massive land, power, water and talent,” Chey said.

Shares of Samsung and SK Hynix closed down 4.86% and 1.68%, respectively, on Monday with some analysts warning that the surge in investments could lead to a supply glut.

Lee defends plan

Opposition politicians have sharply criticized Lee’s southwest chip hub, questioning whether the proposal is politically motivated given that 85% of voters in the region backed Lee in last year’s presidential election.

The announcement comes as Lee’s approval rating has slid for six weeks to 46.5%, according to pollster Realmeter.

The president defended the proposed southwest chip hub in a series of X posts over the weekend, rejecting criticism that it favors a liberal stronghold.

In addition to chips, science minister Bae Kyung-hoon said South Korea is aiming to invest 550 trillion won in AI data centres by 2029 and more than 1,000 trillion won by 2035, while decentralising infrastructure to support regional growth beyond the capital.

Seoul also plans a robotics and parts cluster in Saemangeum on the west coast, where Hyundai Motor has invested, to rival humanoid robotics advances in countries including China. – Rappler.com