South Korea has unveiled an ambitious long-term industrial strategy focused on semiconductors and artificial intelligence (AI), with President Lee Jae Myung announcing investments worth more than 886 trillion won (about $576 billion) to strengthen the country’s position in the global technology race.
The strategy places semiconductors, physical AI and AI data centres at the heart of South Korea’s economic future while aiming to spread industrial development beyond the Seoul metropolitan area. The government says the plan will boost regional economies, expand chip manufacturing capacity and reinforce the country’s leadership in AI-related technologies.
Massive Investment Targets Chip Leadership
Speaking alongside the heads of Samsung Electronics and SK Hynix on Monday, President Lee described the initiative as a “great leap forward” built around the “triple axis” of semiconductors, physical AI and data centres.
“We must secure the core elements of AI faster than any other country,” Lee said.
Industry Minister Kim Jung-kwan announced that Samsung Electronics and SK Hynix will invest 800 trillion won (about $518.3 billion) to build two new semiconductor fabrication plants each in South Korea’s southwest.
In addition, the city of Gwangju and South Jeolla Province are expected to contribute between 5 trillion and 20 trillion won to support the projects. Another 81 trillion won will be invested in developing a semiconductor packaging cluster in the Chungcheong region near Seoul.
Lee said existing semiconductor production centres in Yongin and Pyeongtaek have reached their capacity limits, making expansion into the southwest essential.
“To meet the rapidly increasing demand for semiconductors, we need to quickly complete the production hubs that are currently under construction,” Lee said.
“At the same time, we must secure overwhelming production capacity in advance through large-scale new investments, including in the southwestern region.”
AI Boom Drives Expansion
South Korea has become a major beneficiary of rising global AI investment thanks to Samsung Electronics and SK Hynix’s dominant position in high-bandwidth memory (HBM) chips, which are essential for advanced AI processors.
The government also plans to double dynamic random-access memory (DRAM) production within five years by accelerating construction of additional fabrication plants in the Seoul metropolitan area.
DRAM serves as the main memory in devices such as smartphones and laptops, while HBM is produced by stacking multiple layers of DRAM to deliver the high-speed performance required for AI computing.
Samsung Electronics Chairman Jay Y. Lee confirmed that Gwangju has been selected for one of the company’s new semiconductor clusters. Meanwhile, SK Hynix Chairman Chey Tae-won said the company requires additional time to determine a suitable location and secure the necessary infrastructure.
“It took us nine years to create a cluster in Yongin. Also, a chip factory requires massive land, power, water and talent,” Chey said.
Experts Urge Caution
Industry specialists welcomed efforts to diversify semiconductor investment beyond Seoul but cautioned that building advanced chip manufacturing facilities requires reliable electricity supplies, abundant water, sophisticated logistics networks, strong supplier ecosystems and a highly skilled workforce.
Lee Jong-ho, a professor at Seoul National University’s Department of Electrical and Computer Engineering, said projects of this scale require careful planning.
“To execute something of this magnitude properly requires an extraordinary amount of deliberation,” he said, adding that uncertainty over long-term semiconductor demand remains a significant risk.
Investor concerns also weighed on markets, with Samsung Electronics shares falling 4.86% and SK Hynix declining 1.68% on Monday amid fears that rapid capacity expansion could eventually create a supply glut.
Regional Development and Political Debate
The government’s plans have drawn criticism from opposition politicians, who questioned whether locating major semiconductor investments in the southwest is politically motivated after the region overwhelmingly supported President Lee in last year’s election.
Lee rejected those claims over the weekend, defending the proposal in posts on X and arguing that decentralising high-tech industries would promote balanced national development.
Beyond semiconductors, Science Minister Bae Kyung-hoon announced plans to invest 550 trillion won in AI data centres by 2029 and more than 1,000 trillion won by 2035. The government also intends to decentralise AI infrastructure to stimulate economic growth outside the capital region.
Additionally, South Korea plans to establish a robotics and components cluster in Saemangeum on the country’s west coast, where Hyundai Motor has already invested, as it seeks to strengthen its competitiveness in humanoid robotics.
With inputs from Reuters