The demand for AI chips is booming, forcing expansion and speeding up production! The South Korean government is reportedly in talks with the "storage giants" to invest 30 trillion Korean won to accelerate the construction of the industry cluster for 10 years.

Facing the "exponential, explosive" demand for computing power and high-bandwidth memory (HBM) across the entire artificial intelligence (AI) industry chain, the South Korean government's national strategy with chip giants is undergoing an epic acceleration. According to informed officials from the President's office, the South Korean government is currently engaged in intense and in-depth closed-door negotiations with Samsung Electronics and SK Hynix, planning to invest over 300 trillion won (approximately $230 billion) to establish South Korea's domestic "second semiconductor industry cluster" in the "Gwangju-Gyeongnam Special City" outside the Greater Seoul Metropolitan Area. The official announcement of this decision is expected to be made soon. To address the imminent AI "supply bottleneck," the two chip giants have completely revised their original blueprints, significantly shortening the facility construction period by more than 10 years, with the goal of completion by 2034 to 2035. Policy direction: From "Icheon" to the "Second Cluster" On June 24, South Korea's Presidential Office Policy Director Kim Yong-pan publicly stated that plans by Samsung Electronics and SK Hynix to establish a new semiconductor cluster were in the final stages of discussion and would be officially announced once finalized. Kim Yong-pan pointed out that, due to the "explosive growth" in demand for chips from the AI industry, the current construction progress of the Icheon semiconductor cluster by both companies would be significantly accelerated. "The question now is how we will support the AI revolution. Looking ahead to the next stage seven to eight years from now, we are faced with the challenge of finding a large-scale new site for the second cluster," said Kim Yong-pan at a discussion meeting. Kim Yong-pan emphasized that the challenge is not only to speed up construction progress, even if existing projects are completed ahead of schedule, the Seoul metropolitan area may not have sufficient land, electricity, and water resources to support the next phase of expansion. "We need to accelerate these projects at an extraordinary speed and prepare for subsequent work." The new site direction has already been clarified. When asked if the government is considering the Honam region, including Gwangju, as a potential site for the second semiconductor industry cluster, Kim Yong-pan stated that this approach is consistent with the Lee Myung-bak government's strategy. He explicitly stated that finding a new semiconductor center reflects a broader rethinking of regional development in the AI era, "We need a new force now to alleviate the concentration in the Seoul metropolitan area and expand the growth space." At the same time, Kim Yong-pan made it clear that the Icheon project will not be abandoned or transferred. He emphasized that Icheon has developed into a core project for the expansion of South Korea's chip manufacturing, "This is definitely not about canceling the projects planned for Icheon and transferring them to other regions." According to Korean media SBS, Kim Yong-pan's statement was "with the unchanged plan in Icheon, a new second cluster will be built elsewhere" - meaning that in addition to the existing Icheon cluster, a new semiconductor industry center will be built in a different location. This statement is essential to quelling market doubts. Earlier, Icheon Mayor Lee Sang-ryeok issued a strong statement on June 23, stating, "The citizens of Icheon will never tolerate any attempt to drag the national strategic project of the Icheon Advanced System Semiconductor Complex into public controversy and disrupt its development." Site selection game: Opportunities and controversies in the Honam region Regarding the site selection for the second semiconductor cluster, the current focus is on the Honam region in southwest South Korea. According to Korean media reports, Samsung and SK Hynix have completed water, electricity, transportation, and supporting assessments for five candidate sites, including the Gwangju North District, the tip of Chang-dong County in Jeollanam-do, and the Future Automotive National Industrial Park. Compared to the Gyeonggi-do region, the Honam region has abundant land, water resources, and electricity infrastructure, and Gwangju has already developed a mature semiconductor backend industry ecosystem led by Amkor. The latest research shows that during the operation of global AI data centers and cutting-edge Foundries, 60% of energy consumption is spent on data transfer between chips (the "storage wall" bottleneck). To break through this physical limitation, bulk memory front-end processes, advanced back-end packaging, and a green power network must be integrated. Kim Yong-pan emphasized that establishing the second cluster "is not about shaking or reducing investment in Icheon," but rather a defensive and offensive dual strategy based on reshaping the national industrial map in the era of AI. High-level government-business consultations are underway. SK Group Chairman Chey Tae-won visited the Presidential Office on June 19; Samsung Electronics Chairman Lee Jae-yong is scheduled to meet with President Lee Myung-bak on June 25. Executives of the two companies are planning to further refine the plans with President Lee Myung-bak on June 29. Industry insiders expect the investment agreement to be formally signed during the Southwest Region Development Forum in Gwangju on June 30. Min Hyung-pyo, the incoming governor of the Gwangju-Jeollanam-do Special City Circle, had hinted earlier that the government and businesses have been preparing for a considerable amount of time, with the investment scale far exceeding expectations, and an official announcement is imminent. However, this site selection is also facing significant controversy. Analysts point out that front-end semiconductor wafer manufacturing requires high infrastructure, top talent, and a complete supply chain. Although the Honam region has advantages in water, electricity, and land, it still faces bottlenecks in high-end talent and industry ecosystem. Additionally, there is widespread concern that investment plans for Icheon may be downsized as a result - despite official denials of this speculation. Investment scale and plans Starting at 300 trillion won, aiming for tens of trillions more won The scale of this investment plan is astounding. According to reports, Samsung Electronics and SK Hynix are in discussions with the South Korean government regarding the next stage of investment and site selection, and detailed investment plans may be announced by the end of this month, with the investment scale of the two companies expected to reach 300 trillion to 400 trillion won (over $200 billion). According to industry sources in South Korea, Samsung Electronics and SK Hynix are actively evaluating the construction of a super semiconductor industry cluster in the Honam region, including a front-end wafer manufacturing plant, with a potential investment plan amounting to tens of trillions of won. It is speculated that Samsung's investment may exceed 200 trillion won, while SK Hynix's investment scale may be even larger. The Icheon Industrial Park already has a huge investment base. Located in Yongin, Gyeonggi Province, the Icheon Industrial Park covers approximately 7.28 square kilometers and was officially designated as a national strategic project by the South Korean government in December 2024. Earlier, Samsung announced plans to build the Icheon National Advanced System Semiconductor Industrial Park in Icheon City, with an investment amount of up to 360 trillion won, covering six semiconductor manufacturing plants and related facilities; the total long-term investment for the entire Icheon semiconductor cluster is estimated to be as high as 960 trillion won. Accelerated timetable: Compressed from 2044 to 2034 The explosive growth in AI demand is forcing both companies to significantly shorten the construction period. SK Hynix plans to build four wafer plants in Icheon, and discussions are currently underway to advance the completion time of the fourth plant from the original target of 2044 to 2034 - a full 10 years ahead. For Samsung Electronics, the project originally planned to be completed by 2048 also needs to be completed by around 2034 or 2035 at the request of Kim Yong-pan. Not only the Icheon project is accelerating. According to reports, Samsung Electronics is preparing to start construction on the final wafer plant, P5 Fab 2, in its Pyeongtaek Semiconductor Park, with progress about six months ahead of previous expectations. P5 Fab 2 covers an area of approximately 128,000 square meters, equivalent to 18 football fields, with a three-story design, and a monthly production capacity of 200,000 to 300,000 12-inch wafers, targeting production in 2029. Its sister wafer plant, P5, started at the end of 2025 and aims for production in 2028, with a total investment exceeding 60 trillion won (approximately 266.8 billion yuan). Kim Yong-pan bluntly pointed out the urgency behind the acceleration: "The explosive growth in demand for AI chips requires us to advance the entire Icheon semiconductor cluster schedule." He also warned that power demand could become a limiting factor - "The monster of power demand may devour us," so adequate preparation must be made for supporting facilities such as power infrastructure. AI boom driving trillion-dollar investments in South Korea's chip industry This investment competition in the tens of trillions of won reflects the profound transformation that the global semiconductor industry is undergoing. From the demand side, AI is expanding from the training stage to the inference stage, leading to continuous robust demand for high-bandwidth memory (HBM) and DRAM. Bank of America significantly raised its total potential market size expectations for the semiconductor market in its latest report, from a previous $2.3 trillion to $2.7 trillion, and noted that visibility into AI-related spending has now extended clearly to 2028. From the supply side, global spending on wafer manufacturing equipment is also expected to rise significantly - BofA has raised its forecasts for wafer manufacturing equipment in 2029 and 2030 to $268 billion (+7%) and $292 billion (+9%) respectively. BofA also raised its total potential market size (TAM) expectation for the semiconductor market from the previous $2.3 trillion to $2.7 trillion, indicating that the compound annual growth rate of the industry from 2025 to 2030 will reach 28%. Analysts at BofA pointed out in the report: "It took the semiconductor industry about 50 years to achieve its first trillion-dollar sales, and we expect that artificial intelligence will help the industry add another trillion dollars in sales in just five years." From the competitive landscape, the differentiation in strategies between Samsung and SK Hynix in the HBM4 race is worth noting. Samsung Electronics' HBM4 revenue has exceeded $1 billion, making it the first company in the industry to achieve this milestone within four months of mass production. TrendForce pointed out that Samsung Electronics' technological advantage in HBM4 comes from using a 4nm FinFET process node for its base chips, with a certification timeline that is ahead of its competitors. In contrast, SK Hynix is slowing down the ramp-up pace of HBM4 production capacity, focusing instead on profit margin management - the HBM business now accounts for over 40% of the company's total revenue. The South Korean government expects to collect over 25 trillion won in excess tax revenue this year, and the semiconductor supercycle will bring significant economic multiplier effects. Kim Yong-pan stated, "The explosive growth in semiconductor demand requires us to advance projects at a speed never seen before. This is not just about corporate expansion, but about reshaping the country's competitiveness."