The government will invest 800 trillion won in the southwestern region to build new semiconductor production bases. The plan is to develop semiconductors, physical AI, and AI data centers together to break through the low-growth phase.
President Lee Jae-myung chaired the “National Report Meeting on the Three Great Mega Projects for South Korea’s Leap Forward” at the Blue House reception hall on the 29th. Samsung Electronics Chairman Lee Jae-yong and SK Group Chairman Chey Tae-won attended. The government said it will foster these three sectors as the country’s core growth engines.
◆ Four memory fabs in the southwest… 800 trillion won investment
The center of the investment is the southwestern region. The government will spend 800 trillion won there. Samsung Electronics and SK Hynix will each build two semiconductor factories, or fabs, for a total of four. These will be production bases for memory semiconductors.
Minister of Trade, Industry and Energy Kim Jung-kwan said, “We will turn the entire Republic of Korea into one semiconductor cluster.”
Behind the plan is rising memory demand driven by the spread of artificial intelligence (AI). The government’s emphasis on speeding up production capacity expansion is also being analyzed in that context.
Kim also expressed concerns about slowing growth. He said, “We have entered an era of 1% potential growth, and if the current trend continues, 0% growth may be unavoidable.” Analysts say the semiconductor investment has been designed not only as industrial policy but also as a response to low growth.
The investment is not limited to the southwest. The Chungcheong region will receive 81 trillion won. It will be developed as a packaging hub for advanced semiconductors such as high-bandwidth memory (HBM). HBM is memory that boosts performance by stacking multiple chips and is used for AI computing. The southeastern region and the Daegyeong region will be developed as bases for materials, parts, and equipment companies. Thirty trillion won will be invested over 15 years in next-generation semiconductor research and development.
◆ A decision shaped by the limits of the capital region and balanced development
The choice of Honam as the destination for the investment appears to have been influenced by the limits of production bases in the capital region. Yongin and Pyeongtaek have little room for further expansion in terms of power, water, and land. The government plans to accelerate the creation of the Yongin cluster and double production capacity within five years. It appears to have judged that this alone would not be enough to meet demand.
The decision is being analyzed as one that combines industrial necessity with the rationale of balanced regional development. It is also interpreted as reflecting an intention to ease the concentration of advanced industries in the capital region.
The government also designated physical AI as a strategic industry. Physical AI refers to robot technology that can think and move like a human. It will apply AI to manufacturing sites and develop Saemangeum as a robot production base. The plan also includes training 10,000 specialists over the next five years.
Investment in AI data centers will also be launched in earnest. SK, GS, and Naver will participate. In the first phase, 8.4 gigawatts (GW) of capacity will be built, with about 550 trillion won invested. The 8.4 GW scale is comparable to the power demand of a massive power-generation facility. The government plans to nurture domestic AI semiconductors, as well as the power and cooling industries, on top of this infrastructure.
The three sectors are interconnected. As data centers increase, demand for memory and AI semiconductors will rise. As chip demand grows, utilization of the southwestern production base will increase as well. That appears to be why the government announced the three sectors as a single package.
◆ The key issue is infrastructure and execution speed
Several challenges remain if the plan is to lead to results. Semiconductor fabs and data centers require large amounts of power and water. If supply is delayed, investment schedules will also be affected. Shortening the permitting process is another challenge.
Securing talent is also a variable. The plan to train 10,000 physical AI specialists appears to reflect this demand.
The government stressed its determination to carry it out. President Lee said he would place a direct taskforce office inside the Blue House to oversee the three mega projects personally. The move is interpreted as an effort to speed up implementation.
If carried out as planned, the project is expected to create more jobs in the Honam region and disperse industrial infrastructure that had been concentrated in the capital area. It is also viewed as a strategy to increase the self-reliance of Korea’s AI semiconductors, data, and robotics industries.
The amount of investment has been confirmed, but the results are expected to depend on the speed of execution going forward.