South Korea Unveils a Plan to Invest $880 Billion in Chips & AI

In the upcoming years, South Korea intends to invest at least $880 billion (£666 billion) to expand its chip manufacturing and artificial intelligence (AI) capabilities.

It is a component of the nation's “Three Mega Projects,” which aim to create new data centres, robotics technology, and chip production hubs.

On Monday, President Lee Jae-myung stated that the plan is intended to revitalise the economies of regions outside of Seoul.

Developing AI Infrastructure Beyond Seoul

As the demand for semiconductors rises due to the AI boom, regional rivals such as Taiwan, China, and Japan are making significant investments in chip factories and other technologies.

“We must secure the core elements of AI faster than any other country,” Lee stated. “Semiconductors, physical AI, and AI data centres are the triple axis for a great leap forward.”

Moreover, the leaders of the two biggest chipmakers in the nation, Samsung and SK Hynix, joined Lee in announcing the plans at a televised event.

Meanwhile, the majority of the nation's cutting-edge factories are currently located in Seoul, but Lee also revealed plans to construct additional AI infrastructure hubs outside of that city.

Lee emphasised that the project's importance lies in addressing the survival needs of the country, particularly in reversing the decline experienced in rural areas attributed to industrial concentration in Seoul.

He advocated for breaking the persistent cycle of discrimination and marginalisation, highlighting that this is essential not only for justice and equity but also for achieving sustainable and inclusive growth.

Big Tech Accelerates Investment in AI

Some of the largest beneficiaries of the increase in spending on AI infrastructure are Samsung and SK Group, which include companies like AI chip giant Nvidia among their clientele.

Additionally, U.S. tech behemoths like Google, Amazon, and Meta have announced plans to invest $650 billion in technology this year. The surge in AI data centres propelled SK Hynix's stock market valuation to over $1 trillion in May.

Due to a worldwide shortage of semiconductors brought on by a rise in demand for chips to power AI, prices have increased. Subsequently, Apple and Microsoft raised the prices of some of their devices last week in response to rising component costs.

However, some investors have expressed concerns about the large sums of money being poured into AI, causing some shares to fall in recent days.

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South Korea's Regional AI Push

South Korea's investment plan details the industrial roles assigned to specific regions: Gwangju and Jeolla for a new chip cluster, Chungcheong for advanced packaging, and Daegu and North Gyeongsang for materials, parts, and equipment.

Remarkably, fab construction will be expedited by up to 12 years through accelerated permits and infrastructure upgrades. The AI initiative aims for 8.4 gigawatts in data-centre capacity by 2029 and an additional 10 gigawatts by 2035, alongside plans for a general-purpose world model for physical AI.

In closing, the government plans to procure humanoids for education, defence, and disaster response, with Samsung establishing its robot work in Gumi. In addition, oversupply, market volatility, the size of spending in relation to GDP, and difficulties obtaining resources like talent and power are among the issues brought up.

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