South Korea's KRW 4,755 Trillion AI Push: How Is the Country Mobilizing Nationwide Efforts to Build a Semiconductor Powerhouse?
"We will become an industrial powerhouse that leads the future through large-scale investment and support for cutting-edge industries such as artificial intelligence and semiconductors." In his inaugural address in June 2025, South Korean President Lee Jae-myung made semiconductors part of his second major pledge.
A year later, he stood on the stage at the Cheong Wa Dae guesthouse alongside Samsung Group Chairman Lee Jae-yong and SK Group Chairman Chey Tae-won. The two business leaders announced their respective investment commitments as part of the "Three Mega Projects for a Great Leap Forward" unveiled at the public briefing.
Lee Jae-myung called them national heroes and gave them a 90-degree bow. He had initially planned to kneel in a formal gesture of respect, but his aides stopped him, concerned that the two business leaders might face criticism as a result.
With its strong foundation in the memory industry, South Korea is one of the biggest beneficiaries of the current AI boom. But as the country capitalizes on the rapid growth of AI, it is also considering how to secure its current position and go a step further to become a player with greater influence in the industry.
This is not the first time South Korea has mobilized nationwide efforts to bet on semiconductors. SK Chairman Chey Tae-won's acquisition of Hynix 15 years ago was itself the result of South Korea's semiconductor policy and government support.
South Korea's Semiconductor "Great Leap Forward" Plan Aims to Secure Its Share of the AI Boom
The "Three Mega Projects for a Great Leap Forward" aim to transform South Korea into an industrial powerhouse with a "super gap" in key industries, establishing an irreplaceable position in global technology in the AI era. The initiative covers three key areas: semiconductors, data centers, and physical AI.
Samsung has committed to investing KRW 2,655 trillion (approximately US$84 billion), with KRW 2,030 trillion expected to be allocated to semiconductor clusters in Pyeongtaek and Yongin, including six system semiconductor fabs. Another KRW 425 trillion will be allocated to establish a new semiconductor cluster in Honam, including two wafer fabs and an AI data center. In addition, Samsung will invest a total of KRW 200 trillion in HBM, displays, batteries, advanced packaging substrates, and robotics.
SK Group, meanwhile, has committed to investing KRW 2,100 trillion (approximately US$66.5 billion), including KRW 1,100 trillion in semiconductors and KRW 1,000 trillion in data centers. The investment will include the development of the Yongin semiconductor cluster, the construction of a NAND facility in Cheongju, and two new wafer fabs in the Honam region.
Combined, the two conglomerates have announced total investments of KRW 4,755 trillion. However, the investment plans are still subject to approval by their respective boards of directors.
More importantly, both Samsung and SK have significantly accelerated their timelines. In the Yongin General Industrial Complex, where SK is leading the construction of memory fabs, the completion target has been moved up from 2045 to 2033, shortening the timeline by 12 years. Meanwhile, on the other side of the same city, Samsung is leading the Yongin National Industrial Complex, which will focus primarily on semiconductor foundry operations. Its completion timeline has also been brought forward from 2047 to 2040, cutting seven years from the original schedule.
To ensure that investment can keep pace with the rapid growth of AI, the South Korean government has introduced its "3S+1F" strategy: Speed, Stronghold, Spearhead, and Full Support. The strategy aims to accelerate the review and approval process for semiconductor projects and infrastructure, with the goal of doubling DRAM production capacity within five years. It also seeks to decentralize technology industry clusters beyond the Seoul metropolitan area and concentrate resources on smaller but high-growth markets, with more than KRW 30 trillion to be invested over the next 15 years.
Accelerating Infrastructure and Regulatory Processes: South Korea Clears the Way for the Semiconductor Industry
Following the announcement of the "Three Mega Projects for a Great Leap Forward," the South Korean government quickly selected the Gwangju military airport site as the base for the Honam semiconductor industrial cluster. It plans to enact the "Super Special Zone Special Act" by the end of the year to streamline environmental assessments, accelerate the development of infrastructure such as power, water, transportation, and housing, and strengthen South Korea's competitiveness in the semiconductor industry.
"We must move forward with the relevant procedures simultaneously, significantly reduce the time required, and continuously improve regulations," Lee Jae-myung emphasized at a public-private joint inspection meeting on August 10. "Given our current situation, simply moving quickly is no longer enough. We must launch a blitzkrieg."
South Korea's Semiconductor Special Act, which officially took effect in August 2026, established the "Special Committee for Strengthening the Competitiveness of the Semiconductor Industry," chaired by the President, and created a dedicated special account to support the development of the semiconductor industry.
Notably, the legislation initially considered including a provision that would exempt R&D personnel from the 52-hour weekly working-hour limit. However, due to disagreements between labor and management, as well as differences between the ruling and opposition parties, the provision was ultimately not included.
However, the investment plans for AI and semiconductors have also drawn concerns over potential political favoritism. South Korea held its local elections on June 3, and the Honam region, which is set to receive significant investment, has traditionally been a stronghold for the ruling Democratic Party of Korea. Opposition parties have pointed out that just two months earlier, SK Chairman Chey Tae-won had expressed reservations about developing semiconductors in the region, raising questions about whether the decision was influenced by political pressure.
Chey Tae-won later responded that semiconductor fabs need to be built in locations with sufficient access to water, electricity, labor, and land, adding that "the government determined that Honam was suitable."
Aligning with the government's choice of locations for new facilities is nothing new for SK hynix. In fact, the company itself was born out of South Korea's semiconductor policy.
In 1999, shortly after the Asian financial crisis, the Kim Dae-jung administration pushed for a "Big Deal" that required conglomerates to exchange businesses and consolidate production capacity under a single major player. Semiconductors were at the center of one of the largest such deals, with Hyundai Electronics acquiring a 59% stake in LG Semiconductor for more than KRW 2.5 trillion. LG resisted the deal until the very end.
Following the merger, the company was renamed Hynix, but it soon came under creditor-led management. At the time, it had accumulated losses of KRW 11 trillion, and its creditor banks at one point held an 81.4% stake in the company.
Hynix was able to continue operating in part because the South Korean government assisted with its debt restructuring. However, the measures were later deemed to constitute government subsidies by the European Union, the United States, and Japan, which imposed substantial countervailing duties on Hynix.
Although SK hynix's current position is largely the result of its long-term commitment to HBM technology, the company has also become closely intertwined with South Korea's semiconductor policy. The South Korean government has mobilized resources nationwide to secure water, electricity, land, and talent for the company, while introducing new policies to accelerate environmental assessments and increase building floor-area ratios. It has even courted controversy by considering legislation related to the Mega Special Zone that would exempt certain semiconductor R&D personnel from the 52-hour weekly working-hour limit.
"Keeping Pace with the Kumamoto Plant": How Have Taiwan and South Korea's Semiconductor Rivalry Evolved?
At the second inspection meeting, Lee Jae-myung called for the Honam semiconductor cluster to be developed "at a pace no slower than Japan's Kumamoto." He was referring to TSMC's first Kumamoto fab, which began construction in 2022 and entered mass production by the end of 2024. As South Korea pursues this large-scale strategy to strengthen its semiconductor industry, Taiwan still appears to be a key benchmark in its efforts to enhance competitiveness.
Seven Years Between Investment Commitments and Production Capacity
The South Korean government and its two major conglomerates announced investment commitments totaling KRW 4,755 trillion in 2026. But semiconductor fabs cannot be built overnight. From groundbreaking to the completion of the first cleanroom and eventually full-scale mass production, the process takes at least three to five years. If AI demand slows around 2032, these fabs could face the heaviest depreciation burden just as demand begins to weaken.
Data as of: August 18, 2026 | Scope: Announced schedules from SK hynix and Samsung | Source: Business Next Editorial Team |
First New Fab to Begin Operations 2029 SK hynix Yongin Y2 | First Fab in Honam Begins Operations 2031 Government target | Yongin General Industrial Complex 2033 12 years ahead | Yongin National Industrial Complex 2040 7 years ahead |
Announced Construction and Completion Timeline
Company | Project | Timeline | Focus |
SK hynix | Cheongju M17 | 2027–2028 | NAND |
SK hynix | Yongin Y2 | 2027–2029 | DRAM |
SK hynix | Yongin General Complex | 2033 | 4 fabs |
Samsung + SK hynix | Honam Cluster | 2031 | First fab |
Samsung | Yongin National Complex | 2040 | 6 fabs |
▲ Around 2032: AI Demand Slowdown Risk Window
The relationship between Taiwan and South Korea in the semiconductor industry has evolved significantly over the years. In the 1990s, Taiwan actively developed the DRAM industry and competed with South Korean manufacturers but gradually withdrew from the market. In 2008, Samsung expanded its production capacity despite the global financial crisis, while Germany's Qimonda and Japan's Elpida subsequently went bankrupt. That year, Taiwan's DRAM manufacturers collectively suffered losses of NT$159.2 billion.
Since the 2010s, Taiwan and South Korea's semiconductor industries have moved in different directions: Taiwan has established a dominant position in foundry services, while South Korea has become a leader in the memory market. Although Samsung continues to compete in advanced foundry processes, according to the latest statistics from TrendForce, Samsung's foundry market share fell to 5.9% in the second quarter of 2026, while TSMC's reached 72.5%.
As the industry enters the AI era, the competitive and cooperative relationship between Taiwanese and South Korean companies has become increasingly complex. AI has brought companies from Taiwan and South Korea that once held advantages in different areas together as partners. SK hynix has even entrusted TSMC with the production of the logic base die for HBM4, which industry estimates suggest accounts for more than 20% of the total cost of an HBM4 chip.
Taiwanese companies, meanwhile, remain heavily dependent on memory products from South Korea. With memory prices remaining high recently, Acer and ASUS have notified customers of price increases ranging from 15% to 20%. Quanta Computer has also seen its gross margin fall below 5% as higher memory costs have driven up expenses.
Last year, South Korea surpassed Japan for the first time to become Taiwan's largest source of trade deficit.
Meanwhile, Samsung continues to aggressively pursue the advanced foundry market, with the six foundry fabs planned for Yongin aimed directly at competing with TSMC. Some observers also believe that South Korea's efforts to diversify its semiconductor clusters under the "Three Mega Projects for a Great Leap Forward" are modeled on Taiwan's semiconductor industry development.
In the memory sector, Taiwan and South Korea are partners, but in advanced semiconductor manufacturing, a new round of competition may be about to emerge.
Source of Information: Business Next
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