South Korea plans massive chip hub with $471 billion investment

South Korea unveiled plans by leading firms such as Samsung Electronics and SK Hynix to spend more than US$470 billion establishing the world’s largest chipmaking cluster, joining a global race to safeguard domestic supply.

The government on Monday outlined a blueprint involving investment of 622 trillion won (US$471 billion) from the private sector in the years leading up to 2047.

South Korea will spend the money to build 13 new chip plants and three research facilities, on top of an existing 21 fabs. Spanning Pyeongtaek to Yongin, the area is expected to be the largest in the world, capable of producing 7.7 million wafers monthly by 2030.

The envisioned investment is up sharply from when Seoul first unveiled Samsung’s and Hynix’s plans in 2023. South Korea’s government, which works closely with private firms on national imperatives, has been boosting its support for a domestic chip sector that accounts for about 16 per cent of total exports.

It is pledged to protect a linchpin of its economy while grappling with rising global competition. As Japan and Taiwan aggressively invest in their own chip sectors, the South Korean government is committing to extending big tax breaks to local chip firms.

As part of the two-decade plan, Samsung and Hynix are set to build their most sophisticated chip plants at home. Samsung’s betting big on foundry – or making chips for other firms – as part of a 500 trillion won investment by 2047. Smaller rival Hynix aims to invest 122 trillion won in memory in Yongin over the same period.

The government said the region will also house smaller chip design and materials companies. The overarching ambition is to improve the country’s self-sufficiency in semiconductors, while increasing its market share of global logic chip production to 10 per cent by 2030 from 3 per cent now.

The industry ministry said it would ensure the new mega cluster would be supplied with enough electricity and water for operation and benefit from new tax exemptions for certain key chip technologies.

Pangyo, where fabless firms are now concentrated, will be the hub of low-powered, high-performance AI chips. Suwon will be a central test bed for compound semiconductors, while Pyeongtaek will see a new semiconductor R&D centre at Korea Advanced Institute of Science and Technology’s new campus to be completed by 2029.

“Nuclear power plants in the country will provide stable power supplies to the new chip cluster,” President Yoon Suk-yeol said at a town hall meeting announcing the government’s plans at Sungkyunkwan University’s Natural Science Campus in Suwon. “We are already witnessing overseas investment firms flocking in to explore potential business opportunities associated with the emerging chip cluster. This trend represents a continuation of last year’s record-breaking influx of foreign investments into the country.”

The construction of new fabs inside the new mega cluster will create jobs for 70,000 experts as well as 40,000 new positions at companies supplying parts and materials. Taking into account additional job creation effects from the cluster, the industry ministry said the project would generate employment opportunities for 3.46 million people.

“We will make efforts to see outbound shipments of semiconductors, the country’s No. 1 export, reach US$120 billion this year,” Minister of Trade, Industry and Energy Ahn Duk-geun said. “The new mega cluster’s success will further spread to other parts of the nation and become the world’s leading chip hub.” South China Morning Post