South Korea has unveiled an ambitious public-private investment plan worth nearly $1.2 trillion to expand semiconductor manufacturing and artificial intelligence (AI) data centres, marking the country’s biggest technology investment to date.
The massive funding package is aimed at reinforcing South Korea’s position as a global leader in advanced semiconductors while accelerating regional economic development beyond the Seoul metropolitan area.
President Lee Jae Myung announced the initiative in Seoul, describing speed and innovation as critical to maintaining the country’s competitive advantage in the rapidly evolving AI industry.
“Speed is the only path to survival. We must secure the core elements of artificial intelligence faster than any other nation,” Lee said during the unveiling of the public-private partnership.
Samsung and SK hynix to Lead Chip Expansion
Under the plan, South Korea’s two largest semiconductor manufacturers—Samsung Electronics and SK hynix—will jointly invest 800 trillion won (approximately $520 billion) to establish a new semiconductor manufacturing hub in the country’s southwest.
According to the government, the project will include four state-of-the-art semiconductor fabrication plants, with Samsung and SK hynix each constructing two facilities.
Industry Minister Kim Jung-kwan said the initiative is designed to create a second major semiconductor production base outside the existing cluster surrounding Seoul.
“We will develop the southwestern region into a second semiconductor production hub,” Kim said.
The government also pledged to significantly streamline permit approvals and construction procedures to accelerate the completion of the facilities.
“Permit approvals and construction timelines will be dramatically shortened to rapidly expand production capacity,” Kim added.
Officials believe the expanded production capacity will help South Korea maintain its global leadership in memory semiconductors, an industry experiencing unprecedented demand due to the worldwide expansion of artificial intelligence technologies.
AI Data Centres Receive Separate Investment
In addition to semiconductor manufacturing, the government announced plans to invest one quadrillion won—approximately $650 billion—in AI data centres over the next decade.
Science Minister Bae Kyung-hoon said the country intends to invest 550 trillion won in AI data centres by 2029 before expanding capacity further through 2035.
By that time, South Korea expects to build an additional 10-gigawatt AI data centre, bringing total planned AI infrastructure capacity to more than 18.4 gigawatts, supported by investments exceeding 1,000 trillion won.
The data centres are expected to provide the computing power needed for advanced AI applications, cloud services, and next-generation digital industries.
Riding the Global AI Boom
South Korea’s announcement comes as demand for AI computing infrastructure continues to surge worldwide.
The rapid adoption of generative AI has significantly increased demand for high-performance memory chips, particularly High Bandwidth Memory (HBM), where Samsung Electronics and SK hynix remain among the world’s dominant producers.
The boom has driven strong earnings growth for both companies, with profits and share prices rising sharply in recent months as global technology firms expand investments in AI infrastructure.
The government hopes the latest investment will ensure South Korea remains at the forefront of semiconductor innovation despite intensifying international competition.
Boosting Regional Development
Beyond strengthening the country’s technology sector, the investment forms part of President Lee’s broader strategy to reduce economic disparities between Seoul and other regions.
The new semiconductor hub will be located in the southwestern Honam region, covering Gwangju and the Jeolla provinces, areas that have historically received less industrial investment than South Korea’s southeastern manufacturing belt.
The imbalance dates back to the rapid industrialisation policies pursued during the administration of former President Park Chung-hee in the 1960s and 1970s, which concentrated much of the country’s heavy industry around the southeast.
By directing large-scale investment toward Honam, the government hopes to stimulate employment, attract supporting industries and encourage long-term economic growth in the region.
Experts Warn of Challenges
While industry experts welcomed the government’s vision, some cautioned that relocating semiconductor production away from existing industrial ecosystems could prove costly and time-consuming.
Professor Kim Dae-jong of Sejong University warned that companies would face significant financial and operational risks unless sufficient incentives are provided.
“It is essential to minimise the financial burden, amounting to hundreds of trillions of won, as well as the time-related risks faced by companies,” he said.
Similarly, semiconductor engineering professor Lee Jong-hwan of Sangmyung University noted that creating an entirely new manufacturing ecosystem would not happen overnight.
“Establishing production lines from scratch could take more than five years,” he told AFP.
He added that one of the biggest obstacles would be attracting skilled workers and suppliers, many of whom remain concentrated around the Seoul metropolitan area.
Renewable Energy and Water Supply
Analysts also point to the southwest’s abundant renewable energy resources as a major advantage for semiconductor manufacturing, helping companies meet growing commitments to reduce carbon emissions.
However, semiconductor fabrication facilities consume enormous quantities of water, prompting concerns over long-term supply.
President Lee addressed the issue over the weekend, saying government assessments indicate the region can provide approximately one million tons of industrial water per day, enough to support the planned facilities.
Sharing the Benefits of AI Growth
The AI-driven semiconductor boom has sparked broader discussions in South Korea over how the industry’s enormous profits should benefit society.
Earlier this year, presidential chief policy secretary Kim Yong-beom proposed using excess tax revenues generated by the AI sector to fund startup support for young entrepreneurs, expand assistance for rural and fishing communities, introduce basic income programmes and provide additional support for artists.
The industry’s rapid growth has also strengthened labour demands. In May, Samsung Electronics reached an agreement with its largest labour union over bonus payments, successfully avoiding what could have become a major strike.
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With global demand for AI hardware expected to remain strong, South Korea’s record-breaking investment signals its determination to remain one of the world’s leading technology and semiconductor powerhouses while spreading the benefits of industrial growth across more regions of the country.
AFP