South Korea has announced plans to channel nearly $1.2 trillion into semiconductor manufacturing and artificial intelligence infrastructure over the coming years, marking one of the largest industrial investment programmes in its history.
The initiative, which combines government and private-sector funding, is aimed at strengthening the country’s position in the booming AI industry while accelerating economic development in regions outside the capital area.
Speaking at the launch of the programme in Seoul, President Lee Jae Myung stressed the urgency of staying ahead in the global technology race.
“Speed is the only path to survival. We must secure the core elements of artificial intelligence faster than any other nation,” he said.
As part of the plan, technology giants Samsung Electronics and SK hynix will jointly invest 800 trillion won (about $520 billion) to establish a major semiconductor manufacturing complex in the country’s southwest. Government officials said the project will include four fabrication plants, with each company constructing two facilities.
The announcement comes amid surging global demand for AI technologies, which has boosted earnings and market valuations for memory chip producers.
South Korea’s semiconductor industry has become increasingly important to AI development worldwide, given its dominance in memory chip production.
In addition to the semiconductor project, the government unveiled a separate investment programme worth one quadrillion won (approximately $650 billion) for AI data centres over the next decade.
Industry Minister Kim Jung-kwan said the chip project would transform the southwest into a new industrial powerhouse.
“We will develop the southwestern region into a second semiconductor production hub,” he said.
The minister added that regulatory approvals and construction schedules would be accelerated to ensure rapid expansion.
“Permit approvals and construction timelines will be dramatically shortened to rapidly expand production capacity,” Kim said.
“Through this, we will maintain an overwhelming market leadership and a decisive technological gap in the memory semiconductor sector.”
Science Minister Bae Kyung-hoon outlined further details of the AI infrastructure programme, saying the country would commit 550 trillion won to AI data centres by 2029.
“By 2035, an additional 10-gigawatt AI data centre will be built, with a total investment exceeding 18.4 gigawatts and 1,000 trillion won.”
The investment package is intended to stimulate growth in the Honam region, which includes Gwangju and the Jeolla provinces.
Despite being a traditional political stronghold for liberals, the area has historically trailed the country’s more industrialised southeast in economic development.
Experts, however, have raised concerns about the practicality of building a large-scale semiconductor ecosystem away from the established industrial clusters surrounding Seoul.
Kim Dae-jong, a business administration professor at Sejong University, warned that without sufficient incentives for companies, the strategy could create challenges for the industry.
“It is essential to minimise the financial burden, amounting to hundreds of trillions of won, as well as the time-related risks faced by companies,” he said.
Analysts noted that the southwest possesses significant renewable energy resources, which could help technology firms meet sustainability targets.
Nevertheless, creating an entirely new manufacturing network in the region is expected to require substantial investment and time.
“Establishing production lines from scratch could take more than five years,” said Lee Jong-hwan, a semiconductor engineering professor at Sangmyung University.
“The biggest challenge is that most skilled workers and suppliers remain concentrated around the Seoul metropolitan area.”
Questions have also emerged over the availability of water needed for semiconductor production. Addressing the issue, President Lee wrote on X over the weekend that “assessments indicate it is possible to supply one million tons of industrial water per day” in the region.
The investment push comes as policymakers debate how the financial gains generated by the AI-driven semiconductor boom should be distributed across society.
In May, presidential chief policy secretary Kim Yong-beom proposed using excess tax revenue from the sector to support youth entrepreneurship, provide assistance to rural and fishing communities, and fund programmes for artists.
The industry’s rapid growth has also intensified labour negotiations. Samsung recently avoided a major strike after reaching an agreement on bonus payments with its largest workers’ union.
