AI boom meets neglected Honam region in strategic semiconductor investment

SK Group Chairman Chey Tae-won's recent statement at a national report on mega-projects, "We will build the future of AI in Korea," captured attention. This declaration followed his remarks in a Nikkei interview suggesting the possibility of building new semiconductor plants outside South Korea, even mentioning Japan as a potential candidate. His latest statement appears to be a deliberate effort to reaffirm his commitment to domestic investment, addressing the significant stir caused by his earlier comments.

Chey has repeatedly advocated for greater economic integration between South Korea and Japan, proposing that in an era of global self-interest, Korea should envision larger economic blocs, similar to Europe's economic community. The mention of a Japanese semiconductor plant, however, raised concerns, as technology, once transferred abroad, is difficult to reclaim. Establishing a memory semiconductor plant in Japan could empower it to revive its memory industry and emerge as a competitor. In this context, Chey's expressed intention to build a semiconductor fabrication plant in the Honam region holds considerable significance.

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We will build the future of AI in Korea.

The world is currently embroiled in a semiconductor war. Japan is striving to regain its former glory by attracting Taiwan's TSMC and investing heavily in its domestic semiconductor companies. The United States, determined to reclaim its status as a semiconductor manufacturing pioneer, is employing all available means. Former President Donald Trump recently set a goal to increase domestic chip self-sufficiency from 10% to 50%. Given the precedent of pressuring TSMC to move a significant portion of its production to the U.S., it is plausible that similar actions could occur in the memory sector, potentially targeting Samsung Electronics and SK Hynix.

Domestically, the situation is equally pressing. Samsung and SK Hynix urgently need to build new fabrication plants, but the Yongin semiconductor cluster project remains delayed due to issues with electricity and water supply. Prolonged delays could compel these companies to seek overseas locations. Failure to meet the explosively growing market demand could lead to the loss of market share to foreign competitors. This context underscores Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol's explanation that "if companies had not made bold, large-scale local investment decisions this time, they would inevitably have had to turn overseas."

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If companies had not made bold, large-scale local investment decisions this time, they would inevitably have had to turn overseas.

This project presents a golden opportunity for regional balanced development. South Korea has experienced deepening regional inequality since its rapid industrialization in the 1960s. The Park Chung-hee administration's focus on heavy and chemical industries led to the concentration of industrial complexes in the Yeongnam region, widening the economic and demographic gap between regions. Since the 1990s, the focus has shifted to the Seoul metropolitan area. While the Roh Moo-hyun administration pursued balanced development, its achievements were limited to the construction of Sejong City and the relocation of public institutions. The Lee Myung-bak administration further solidified the one-centric system with extensive deregulation of the Seoul metropolitan area, contributing to the increase in its population from 21% in 1960 to over 51% today. Overcrowding in the capital region exacerbates a high-cost, low-efficiency structure and drastically reduces the quality of life. The recent surge in Seoul's housing prices, partly fueled by large performance bonuses paid by Samsung and SK, paradoxically pushes the one-centric system beyond its sustainability point. Meanwhile, regional areas, compounded by low birth rates and aging populations, are approaching a state of demographic collapse. Numerous balanced development pledges in the past have been thwarted by limitations in funding and attracting private investment. However, the AI-driven semiconductor boom may finally break through these obstacles. In this regard, the current project can be described as a second balanced development strategy, following the Roh Moo-hyun administration's efforts.

Despite some voices raising objections with the "impossibility of semiconductors in Honam" argument, now is not the time for such discord. Instead of opposing based on electricity and water issues, efforts should focus on leveraging existing infrastructure and addressing deficiencies. The Honam region has developed industrial complexes and infrastructure but has not had the opportunity to fully utilize its potential due to a lack of tenant companies. The region's abundant renewable energy resources, coupled with its long-term underdevelopment, may paradoxically work in its favor for site selection, as highlighted by Kang Hoon-sik, Senior Secretary to the President for Economic Affairs, who cited low land prices as a key factor. This confluence of AI and underdeveloped regions is truly remarkable. This project must be seized as a turning point to simultaneously open the future of Korea's industry and regional balance.

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The confluence of AI and underdeveloped regions is truly remarkable.