South Korea to invest nearly $1.2tn in chips, AI data centres

South Korea is set to invest close to $1.2 trillion, a sum exceeding two-thirds of its GDP, in a new chip-building hub and artificial intelligence data centers. This ambitious plan aims to leverage the surging global demand for AI technology and simultaneously foster development in regions outside the capital.

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Speed is the only path to survival. We must secure the core elements of artificial intelligence faster than any other nation.

This substantial financial commitment comes as South Korea, Asia's fourth-largest economy, experiences a surge driven by the global AI boom. South Korean memory chip manufacturers are playing a pivotal role in this rapidly evolving industry. President Lee Jae Myung emphasized the urgency, stating, "Speed is the only path to survival. We must secure the core elements of artificial intelligence faster than any other nation."

Samsung Electronics and SK hynix are slated to invest a combined 800 trillion won (approximately $520 billion) in a new semiconductor fabrication hub in the southwestern part of the country. Both companies have recently seen significant increases in profits and share prices due to the intense demand for AI infrastructure, which has strained the global supply of memory chips. The government also announced a separate investment of 1 quadrillion won (around $650 billion) dedicated to AI data centers over the next decade.

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We will develop the southwestern region into a second semiconductor production hub.

Industry Minister Kim Jung-kwan detailed that the Samsung-SK hynix project will include four fabrication plants, aiming to transform the southwestern region into a major semiconductor production center. The government plans to expedite permit approvals and construction timelines to rapidly expand production capacity, thereby maintaining market leadership and a technological advantage in the memory semiconductor sector. Science Minister Bae Kyung-hoon added that the country will invest 550 trillion won in AI data centers by 2029, with further expansion planned by 2035.

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Permit approvals and construction timelines will be dramatically shortened to rapidly expand production capacity.

However, concerns have been raised about the strategy. Professor Kim Dae-jong of Sejong University cautioned that without incentives for companies to relocate voluntarily, the massive investment could potentially backfire and harm the nation's semiconductor competitiveness. The plan aligns with President Lee's agenda to develop regions outside Seoul, specifically targeting the Honam region, which has historically lagged behind the more industrialized southeast.

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Through this, we will maintain an overwhelming market leadership and a decisive technological gap in the memory semiconductor sector.