South Korea on Monday unveiled an expansive industrial strategy focused on semiconductors and artificial intelligence, with President Lee Jae Myung announcing more than $576 billion in investments aimed at cementing the country’s global leadership and fostering more balanced economic growth.
Anchored by chip giants Samsung Electronics and SK Hynix, the initiative represents Lee’s most ambitious effort yet to align South Korea’s AI and semiconductor ambitions with his promise to reduce regional inequalities and spur economic development 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,” centred on the “triple axis” of semiconductors, physical AI and data centres.
Samsung and SK Hynix will invest 800 trillion won ($518.30 billion) with suppliers 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. Kim said a further 81 trillion won is expected for a chip packaging cluster in the Chungcheong area near Seoul.
Expanding Production Beyond Seoul
“To meet the rapidly increasing demand for semiconductors, we need to quickly complete the production hubs that are currently under construction,” he 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.
High-bandwidth memory (HBM) chips made by Samsung Electronics and SK Hynix have become central to the global AI race. Industry Minister Kim Jung-kwan said South Korea plans to double dynamic random-access memory (DRAM) output within five years by accelerating fab construction in the Seoul metropolitan area.
Samsung Electronics Chairman Jay Y. Lee said the company has chosen Gwangju for its new chip cluster, while SK Hynix Chairman Chey Tae-won said more time is needed to finalise a site and secure infrastructure in the southwest.
“It took us nine years to create a cluster in Yongin. A chip factory requires massive land, power, water and talent,” Chey said.
Political Debate and Infrastructure Challenges
Opposition politicians have sharply criticised 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 favours a liberal stronghold.
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.
(With inputs from Reuters)
