South Korea is orchestrating investments of at least 1,350 trillion won ($880 billion) from companies including Samsung Electronics Co. into chips and data centers, a giant outlay in digital infrastructure it called essential to surviving the AI era. Samsung Group and SK Group said they plan to build two chipmaking plants apiece in the southwest for a total of 800 trillion won, to rapidly expand production capacity to meet increasing demand. South Korea also announced 550 trillion won of investment from companies including internet leader Naver Corp. to build 8.4 gigawatts of AI data-center capacity by 2029. “Longer-term, however, we see the investment as a net positive, provided memory demand remains robust. Overall, the additional capacity strengthens Korea’s supply-chain leadership.”
South Korea has emerged as one of the biggest beneficiaries of the AI boom, but concerns have been growing that the spoils have not been shared evenly across the country. President Lee’s approval rating has fallen to its lowest level since he took office a year ago, according to a Gallup Korea poll that pointed to growing disapproval of Lee’s handling of the economy, the weak won and housing policy. “But building leading-edge chip fabs isn’t just about spending money. You need power, water, talent and capital—and above all, execution.”
Read more: GLOBAL INSIGHT: AI Boom Built on Shaky Geopolitical Foundations
Key Takeaways
- Samsung Group and SK Group said they plan to build two chipmaking plants apiece in the southwest for a total of 800 trillion won, to rapidly expand production capacity to meet increasing demand.
- South Korea also announced 550 trillion won of investment from companies including internet leader Naver Corp.
- The country aims to double its memory production capacity within five years and secure world-class manufacturing capabilities to pull far ahead of competing nations, the industry ministry said in a statement.
- South Korea must move faster than its global rivals to secure leadership in chips, data centers and physical AI, President Lee Jae Myung said at a briefing where he called the Samsung and SK Hynix leaders “national heroes.” “We’re entering an era where the page turns in the blink of an eye,” he said, pledging government support to build an AI ecosystem quickly.
- “Speed is the only way to survive.” The scale of Korean tech spending underscores the government’s urgent desire to maintain the nation’s lead in memory chips crucial for AI, while ensuring longer-term national security.
Insights & Analysis
- The government talked Monday about supporting the endeavor with infrastructure including water and power projects, but didn’t disclose specific policies or spending.
- But if sustained over the long term, the cumulative sum would approach the eye-watering amounts budgeted by hyperscalers such as Microsoft Corp.
- “These announcements cut both ways: they signal confidence in long-term demand, but also raise the risk of future oversupply,” said Uday Vikram, co-chief investment officer at Singapore-based Klay Group.