South Korea is fueling an $880 billion bet, led by by national champions Samsung Electronics Co. and SK Hynix Inc., to defend its lead in the artificial intelligence chip boom and ensure it enriches the entire country. If it succeeds, one of AI’s first big winners could offer a template for inclusive growth far beyond its borders.
President Lee Jae Myung’s televised pitch had all the buzzwords, promising the massive outlay would go toward semiconductors, data centers and physical AI. But the most consequential part of the plan is geographic.
The government wants to create regional high-tech hubs and new semiconductor production hotspots. In a post on X before Monday’s announcement, Lee described Korea’s rise as one of “dazzling achievements” and “severe imbalances.” He called on citizens to support the “national survival goals” of easing capital-region concentration and promoting balanced development. He has a point. As I’ve written before, Korea’s economic miracle never spread gains evenly; this is the country that produced both SK Hynix and Squid Games.
The instinct to spread AI’s spoils is correct. Now comes the hard part.
Critics already accuse Lee of choosing regional hubs to score political points, a charge he vehemently denied over the weekend, saying companies identified the sites. The politics are delicate — a recent Gallup Korea poll showed his approval rating slipping. The industry minister has pointed to the rising land costs around Seoul, along with ample space and water supply in other regions. But if short-term political gains drive any part of the process, the entire plan could backfire, yielding inefficiency and waste, not to mention scandal. Government and corporate leaders need maximum transparency at every step.
Samsung and SK Hynix plan to each build two new semiconductor plants in the southwest region, expanding beyond their existing cluster in Gyeonggi Province, just south of Seoul. Land Minister Kim Yun-duk said that the plan for hubs was inspired by Silicon Valley and Shenzhen and would integrate companies, universities, research institutions and residential communities. The aspiration is right, but it will require investments in local infrastructure, schools, hospitals, housing and all the factors that would make in-demand engineers want to build a life beyond Seoul.
Governments trying to force a two-for-one win by relocating industries to areas that need revival often get neither. Still, concentration carries its own risks. Rising land prices, power-grid strain and other centrifugal forces are already luring semiconductor manufacturing away from the current cluster. And a natural disaster or geopolitical shock can do significantly more damage when too much of an economy sits in one metropolitan area.
It’s why Taiwan Semiconductor Manufacturing Co.’s expansion into Kyushu is commercially sensible for the world’s most important chipmaker as much as it’s a development win for the Japanese island. TSMC’s spread from Hsinchu in the north of Taiwan to Kaohsiung in the south offers the same lesson. Diversification, when done well, is good for business and essential for growth.
Public sentiment is also on Lee’s side. Surveys have shown broad concern over the imbalances between the capital region and the rest of Korea. It gives a mandate to at least try.
Chip policy has hardly been apolitical. The Covid-era shortage of tiny components used in everything from consumer electronics to defense systems turned onshoring manufacturing into a national security obsession from Washington to Tokyo. AI has only raised the stakes, and Seoul is right to seek to defend its lead with industrial strategy.
But the details — currently sparse — will matter more than the hundreds of billions of dollars or the images of Lee holding hands with Samsung and SK Hynix chairmen.
It’s not immediately clear how much of the spending is new and how much repackages plans that the firms were already pursuing to meet the insatiable global demand for memory chips for data centers. The timeline was also vague. Even if all the money materializes, the gamble rests on another uncertain assumption: that AI demand will keep growing at today’s pace, which is far from guaranteed.
Nonetheless, global policymakers should be watching closely. South Korea has become ground zero for a broader debate about who captures the AI windfall in society (some chip worker bonuses alone this year are expected to be an order of magnitude higher than the average South Korean worker’s annual wages). In a Facebook post that went viral last month, a policy chief for Lee warned that excess profits in the AI era could “structurally exacerbate the ‘K-shaped’ economic divide within society.” It struck a nerve abroad as governments try to invest in and diffuse the technology while bracing for potential mass job disruption.
Propelled by its chip champions, South Korea has been one of the boom’s first winners. Lee’s gamble is as much about maintaining that edge as preventing AI from widening the divide between insiders and those left behind or displaced by the technology.
The ambition is huge. Regional tech hubs could spread gains, reduce concentration and turn overlooked areas into engines of growth. It could be a model for jurisdictions from Japan to the UK that are also struggling with aging rural economies and young workers leaving for urban opportunities.
But the risk is just as immense. The Lee administration’s massive bet could also become a warning that South Korea can win the AI boom and still leave half the country behind.
This report is auto generated from the Bloomberg news service. ThePrint holds no responsibility for its content.