South Korean technology giants Samsung Electronics and SK Hynix announced plans to invest a combined $518 billion in developing a new semiconductor manufacturing hub in the southwestern part of the country. The joint investment aims to capitalize on increasing global demand for memory chips driven by advances in artificial intelligence (AI) technology.
The announcement came Monday during an event attended by President Lee Jae Myung, who highlighted the government's strategy to promote economic growth outside the Seoul metropolitan area, which has traditionally been the center of South Korea’s semiconductor industry. Currently, Samsung and SK Hynix operate their major fabrication plants south of Seoul, producing approximately two-thirds of the world’s memory chips. The new investment will see each company build two new fabrication facilities in the southwest, with Samsung identifying the city of Gwangju as a likely site.
Together, Samsung and SK Hynix plan to spend about 400 trillion won (roughly $260 billion) each on these new plants. Additionally, there are plans to invest 81 trillion won on chip-packaging facilities in the central region. These expansions form part of broader government initiatives termed the “three megaprojects,” which focus on semiconductor manufacturing, AI data centers, and AI-driven robotics. Over the long term, Samsung and SK Hynix expect to invest more than $2 trillion related to these efforts.
The surge in global memory-chip demand is largely attributed to the critical role these components play in AI systems. Prices for memory chips have reached record highs amid global shortages, encouraging companies to expand capacity swiftly. Chey Tae-won, chairman of SK Group, emphasized the necessity of establishing a new manufacturing base to address anticipated shortages. SK Hynix is also accelerating construction of additional factories in Yongin and Cheongju, cities closer to Seoul.
However, the plan has elicited some criticism from industry observers who argue that the southwestern region’s distance from the established semiconductor ecosystem in the Seoul area could complicate supply chains and pose challenges in attracting skilled engineers and younger workers to relocate. Some analysts expressed concern that the move might affect operational efficiency and profitability.
President Lee acknowledged the potential growth and profit incentives for companies to remain near Seoul but underscored the importance of balanced regional development for national interests. To support the transition, the government intends to provide tax incentives and other forms of assistance to encourage the companies to invest in less-developed regions.
The move represents a significant step in South Korea's ambition to maintain its global leadership in semiconductor technology while promoting more inclusive economic growth across the country.