Samsung Electronics and SK Hynix are reported to be reviewing a plan to build a semiconductor production base worth hundreds of trillions of won in the Honam region.

Political and industry sources said on Tuesday the two companies are pushing to build new semiconductor plants in Gwangju and South Jeolla and are coordinating details with the goal of an announcement at a public-private joint meeting chaired by President Lee Jae-myung. Their combined investment is being discussed at a minimum of 300 trillion won and up to 400 trillion won.

The investment would include front-end memory production lines, back-end advanced packaging and AI data centers. Semiconductor processes are divided into front-end processes that etch circuits onto wafers and back-end processes that turn finished chips into final products. The industry initially leaned toward back-end-focused investment because it carries less burden for power, water and manpower. But the investment size grew more than expected as SK Hynix began seriously reviewing an option that also includes front-end processes.

A site near Gwangju is under review. Semiconductor production in Gwangju is expected to be possible within 3 to 4 years from the time of investment. The explanation is that factory construction, equipment installation and production testing typically take 1 year each. Democratic Party lawmaker Jung Jin-wook (정진욱) told a news conference, "It is highly likely that investment on a much larger scale than initially expected will be made," adding, "It will be an opportunity for Gwangju to leap into a semiconductor cluster city." Jung said, "You can assume front-end facilities will come in, including memory semiconductors and wafer production."

The backdrop to the larger investment is a combination of a response to surging demand for AI semiconductors and the government’s push for balanced regional development. The government is promoting a national balanced development strategy centered on 5 mega-regions and 3 special self-governing provinces, along with the creation of a southern semiconductor belt. President Lee met SK Group Chairman Chey Tae-won on June 19 and is set to meet Samsung Electronics Chairman Lee Jae-yong on June 25. Lee is also being discussed as possibly visiting Asan in South Chungcheong province on July 2 to simultaneously unveil plans to build fabs in Gwangju and South Jeolla and an investment proposal for a back-end process plant in South Chungcheong.

Demand is rising for HBM, a high-performance memory that stacks AI semiconductors and memory in multiple layers to boost data processing speed, adding to the need to expand production capacity. A semiconductor factory takes about 7 years from site selection to completion, making it a time when the next candidate site needs to be designated in advance. Samsung Electronics’ Pyeongtaek P5 could begin operation as early as 2030, and SK Hynix’s Yongin plant is set to start operating in 2027. SK Hynix has presented a goal of doubling memory production capacity within 5 years, making it necessary to secure an additional base beyond Yongin.

There are also many tasks. Operating a cutting-edge fab requires a large extra-high-voltage power grid and industrial water in the range of hundreds of thousands of tons per day, and building infrastructure alone takes several years. Measures to secure key personnel have also not been decided. A special semiconductor law that includes support for semiconductor clusters for balanced regional development is set to take effect in August. If designated as a cluster, it becomes eligible for state funding support for infrastructure such as power, water and roads, along with an exemption from preliminary feasibility studies or priority selection for fiscal projects with a total project cost of 50 billion won or more.