South Korea unveils near-$1.2 trillion chip and AI drive led by Samsung and SK Hynix

South Korea on Monday set out one of the largest industrial bets of the artificial-intelligence era, as President Lee Jae-myung joined the chairmen of Samsung and SK Hynix to commit close to $1.2 trillion to semiconductors, AI and data centres over the coming decade.

Announced at the presidential office in Seoul on 29 June, the package bundles two headline pillars: roughly 800 trillion won ($518 billion) for a new chip-manufacturing cluster, and more than 1,000 trillion won ($648 billion) for AI data centres by 2035. Agence France-Presse put the combined figure at nearly $1.2 trillion; Reuters framed the chip-and-AI drive as worth more than $576 billion over several years. Either way, the numbers eclipse the public funding behind comparable Western programmes.

Lee cast the initiative as a "great leap forward" resting on a "triple axis" of semiconductors, physical AI and data centres, and tied it to a pledge to revive regions beyond the Seoul metropolitan area.

Only a race for speed is the way to survive. We must secure the core elements of artificial intelligence faster than any other country.

Those were the words of President Lee, according to the Korea Herald, at an event where he also called Samsung's Lee Jae-yong and SK Group's Chey Tae-won "national heroes, or heroes of the Korean people."

A state-backed bet built on private money

For all the official billing, the capital is overwhelmingly corporate. Samsung Electronics and SK Hynix — the world's two largest memory-chip makers — will invest 800 trillion won with suppliers to build two new fabrication plants each in the south-western Honam region, according to Reuters. The Korea Herald reported the split as roughly 425 trillion won from Samsung and 400 trillion won from SK.

The government's role is to orchestrate and de-risk rather than to write the cheques. Ministries for industry, science, land and energy have promised power, water and infrastructure, and a new Special Act on the semiconductor industry takes effect on 11 August, building on tax credits of up to 20 percent for large firms' facility investment. Regional authorities in Gwangju and South Jeolla are to co-invest between 5 trillion and 20 trillion won.

The main components, as set out by officials and reported across Korean and international outlets, are:

• ~800 trillion won ($518bn) for four new Samsung and SK Hynix fabs in the south-western Honam region.
• ~550 trillion won by 2029, rising above 1,000 trillion won ($648bn) by 2035 for AI data centres with SK, GS Group and web portal Naver, scaling capacity from 8.4 to 18.4 gigawatts.
• 81 trillion won ($52.5bn) for an advanced chip-packaging cluster in the Chungcheong area near Seoul.

Samsung's Lee Jae-yong said the company had chosen Gwangju for its new cluster. SK Hynix's Chey Tae-won was more cautious, saying the firm needed more time to finalise a site and secure infrastructure — a warning grounded in experience.

It took us nine years for us to create a cluster in Yongin. Also, a chip factory requires massive land, power, water and talent.

Markets were unconvinced that bigger is always better. Samsung Electronics shares closed down 4.86 percent and SK Hynix fell 1.68 percent on Monday, with some analysts warning that a surge of new capacity could tip the memory market into a glut.

Why Europe is watching from behind

The scale of Seoul's commitment throws Europe's chip ambitions into sharp relief. The European Union's flagship Chips Act foresees more than €43 billion of public investment and over €100 billion of policy-driven public and private money to 2030, with the stated aim of roughly doubling the bloc's share of the global semiconductor market from about 10 percent to 20 percent by the end of the decade.

By that yardstick, a single Korean corporate pledge for memory fabs — around $518 billion — exceeds the EU's entire public Chips Act package by more than tenfold. Institutional reviews have repeatedly warned that Europe risks missing its 2030 target, and the industry body SEMI has urged member states to quadruple their funding. Much of Europe's exposure runs through advanced memory: the high-bandwidth memory that feeds AI accelerators is dominated by SK Hynix and Samsung, leaving European cloud operators, carmakers and industrial firms dependent on supply chains anchored in Asia.

A race that reshapes the supply chain

South Korea's move lands in a global contest already defined by Washington's subsidy-driven reshoring and Beijing's drive for self-sufficiency. By concentrating fabs, packaging and data centres at home — and by pledging to complete the second mega-cluster within Lee's five-year term — Seoul is betting that controlling the physical infrastructure of AI confers lasting strategic leverage.

The risks are equally physical. Chey's caution about land, power, water and talent points to the practical limits of building gigawatt-scale data centres and multiple fabs on a compressed timetable. Yet for economies that depend on the chips Korea makes, the message is unambiguous: the country that supplies much of the world's advanced memory intends to widen, not narrow, its lead — and Europe's roughly €43 billion answer looks ever more modest beside it.