South Korean tech giants to build a $518 billion chipmaking hub to serve soaring AI demand

SEOUL, South Korea (AP) - South Korean tech giants Samsung Electronics and SK Hynix said Monday they will invest a combined 800 trillion won ($518 billion) in building a new computer chipmaking hub in the country's southwest region, capitalizing on surging artificial intelligence -driven demand.

President Lee Jae Myung joined the companies' chairs Monday in announcing the plan, which dovetails with the government's efforts to expand investment beyond the greater Seoul metropolitan area, the country's economic center and heart of its semiconductor sector.

The southwest has been a particular focus, as it lacks major industrial hubs and has historically trailed in economic development. The region has long been a political base for Lee's liberal Democratic Party.

Samsung and SK Hynix, which together produce about two-thirds of the world's memory chips, said they will each build two fabrication plants in the southwest, expanding beyond their existing manufacturing complexes in Gyeonggi Province, south of Seoul.

Samsung Chairman Lee Jae-yong said the company's new fabs will be built in the southwestern city of Gwangju, where experts have proposed several potential sites, including the grounds of a military air base slated for relocation.

The companies didn't specify when the fabs in the southwest regions would be completed. SK Hynix's Chairman Chey Tae-won said the project would be a complex, large-scale effort requiring "vast sites, along with sufficient power, water and skilled workers." He said it took nine years for SK Hynix to establish its major manufacturing cluster in Gyeonggi Province. Still, a significant expansion of manufacturing facilities is needed for the company to keep up with global demand, Chey said.

Government officials dismissed questions about whether the southwest has enough power and water to support major semiconductor fabs. They said the region's strength in renewable energy would give the chipmakers an edge as they face growing global pressure to use cleaner sources of electricity.

Samsung and SK Hynix have reported record profits in recent months as soaring global investment in data centers and other AI infrastructure has fueled demand for memory chips. Government officials and business experts expect AI-driven demand to continue increasing as the technology spreads to AI-powered industrial robots and autonomous vehicles. The chipmakers' existing semiconductor complexes in Gyeonggi Province may reach capacity sooner than expected, they say.

During Monday's event, government officials outlined plans to build what they called a nationwide semiconductor ecosystem, with existing manufacturing hubs in the southeast expanding production of chip components and materials, the central Chungcheong region specializing in chip packaging, while data centers are built across the country.

"We must establish the core building blocks of artificial intelligence faster than any other country. Semiconductors, physical AI and AI data centers are the three pillars of our next great leap forward," the president said.