South Korea announces $576bn industrial strategy for rapid chip production

The South Korean government has announced a $576 billion industrial strategy targeting the rapid expansion of the country’s AI chip production.

Under the plans, Samsung and SK Hynix will invest a combined 800 trillion won ($518.30 billion).

This will be centred on building two new chip fabrication facilities in the country’s southwest, with both companies committed to a further 81 trillion won ($52.5 billion) for a chip packaging cluster in the Chungcheong region to the south of Seoul.

The city of Gwangju and regional government of South Jeolla will back this investment with a further five to 20 trillion won ($3.2 to $12.9 billion).

In a speech attended by the chief executives of both firms, South Korean president Lee Jae Myung said: “We must secure the core elements of AI faster than any other country. Semiconductors, physical AI, and AI data centres are the triple axis for ⁠our great leap forward.”

Samsung and SK Hynix are Korea’s chip giants, and the fourth and sixth largest semiconductor manufacturers in the world respectively.

Each increasingly dominates the market for high-bandwidth memory (HBM), a crucial component for advanced AI chips, as well as dynamic random access memory (DRAM) which is needed for everything from basic devices to frontier data centres.

Kim Jung-kwan, minister of trade, industry, and resources, added that South Korea intends to double its production of DRAM over the next five years and is accelerating the construction of chip fabrication sites in greater Seoul to achieve this goal.

The southwest provinces of South Korea are net energy producers, with a high concentration of onshore and offshore wind turbines.

In a post on X to coincide with the announcement, Lee said the renewable energy potential of the southwest and underdevelopment of land in the region makes it “the world’s optimal location for cutting-edge future industries that consume large amounts of electricity, such as semiconductors and AIDC”.

On 2 June, SK Hynix chairman Chey Tae-won said his firm was committed to doubling its wafer production capacity over the next five years to keep up with demand.