Market AnalysisJul 01, 20262 Min
Why South Korea Is Betting $576 Billion On AI Chips and Samsung
South Korea has announced a massive $576 billion investment plan to strengthen its artificial intelligence (AI) chip industry over the next five years. The initiative is backed by the country's biggest chipmakers, Samsung Electronics and SK Hynix.
The investment will focus on building new AI chip manufacturing facilities, expanding research and development, and improving the country's semiconductor supply chain. The government said the plan aims to make South Korea a global leader in AI chips.
The plan is expected to help narrow domestic regional disparities and revive economies beyond the Seoul metropolitan region.
President Lee Jae Myung Lee described the strategy as a "great leap forward" and said it will focus on three main areas, namely semiconductors, physical AI and data centers. "We must secure the core elements of AI faster than any other country,” he said, adding, “Semiconductors, physical AI, and AI data centres are the triple axis for our great leap forward.”
Why is South Korea expanding beyond Seoul?
President Lee said South Korea cannot rely only on its existing semiconductor hubs in Yongin and Pyeongtaek because they are running out of space and capacity for further expansion. The country needs to build new, large-scale chip manufacturing plants (fabs) to keep up with the rising global demand for AI chips.
The government plans to develop the southwestern part of South Korea into a new semiconductor hub because it has abundant and unused electricity capacity. Building factories there could create jobs and boost local economies outside the Seoul metropolitan area. It would also help spread economic growth more evenly across the country.
The city of Gwangju and South Jeolla Province, located in southwestern South Korea, plan to invest between about US$3.2 billion to US$13 billion. Industry Minister Kim Jung-kwan said that another $52.5 billion investment is expected for a chip-packaging cluster in the Chungcheong area near Seoul.
What is the biggest concern?
Lee Jong-ho, a professor at Seoul National University, said the government's plan “appears to be moving too fast”. The professor also warned that the investment assumes global demand for AI chips will remain strong for decades.
"It would be ideal if demand remained strong for the next 20 or 30 years, but no one can know that with certainty...If demand were to decline, the consequences would be severe," he added.
