South Korea Unveils $1.2 Trillion Chip and AI Investment Plan

President Lee Jae Myung announces South Korea $1.2 trillion chip and AI investment with Samsung and SK hynix

South Korea's $1.2trn chip-AI plan taps Samsung and SK hynix for southwest hub to secure global semiconductor lead.

South Korea is putting big money where its future is.

The country has rolled out a sweeping plan to invest close to $1.2 trillion in chips and artificial intelligence over the next several years. That figure is more than two-thirds of its entire GDP, and it shows just how serious Seoul is about staying ahead in the global tech race.

On Monday, the government unveiled the projects at a high-profile event in Seoul. President Lee Jae Myung stood alongside leaders from Samsung Electronics and SK hynix to lay out the vision.

The president was clear about the urgency. He said South Korea must move fast to lock down the building blocks of AI semiconductors, physical AI systems, and data centres.

This is not just about chips. It is also about spreading development beyond the capital.

The southwest gets the spotlight

For decades, the industrial heart of South Korea has been around Seoul and the southeast. The southwest the Honam region that includes Gwangju and South Jeolla has lagged behind since the rapid growth era of the 1960s and 70s.

That is about to change.

The plan calls for a massive new semiconductor cluster in the southwest. Local media suggest commitments could exceed 1,000 trillion won in the coming years, and official briefings point to up to 1 quadrillion won about $650 billion over a 10-year period for the Honam hub.

Samsung and SK hynix are at the centre of it. The two giants will lead a $576 billion push into semiconductors and AI chips, with new fabrication sites planned for Gwangju and South Jeolla provinces.

Industry Minister Kim Jung-kwan said the project will include four new fabs two built by Samsung, two by SK hynix. The goal is simple: turn the southwest into South Korea’s second chip-making powerhouse.

AI data centres on a different scale

The chip factories are only half the story.

Seoul is also planning a separate, decade-long investment in AI data centres worth around a quadrillion won. The idea is to build the backbone that will power everything from generative AI to advanced manufacturing.

Science officials say the first phase will focus on adding gigawatts of capacity by 2029, with more to follow through 2035. The government promises faster permits and shorter construction timelines to get the facilities online quickly.

Why now?

South Korea is riding the AI boom hard. Memory chip prices have jumped, and both Samsung and SK hynix have seen profits and share prices climb as global demand for AI infrastructure squeezes supply.

The country is already the world’s memory leader, but competition from the US, Taiwan and China is fierce. President Lee’s team believes speed is the only way to keep the edge.

The challenges ahead

Not everyone is convinced it will be smooth.

Analysts point out that most skilled engineers, suppliers and logistics networks are still concentrated around Seoul. Building a full ecosystem from scratch in the southwest could take more than five years.

There are also questions about power and water. The southwest does have strong renewable energy potential wind and solar which fits the companies’ green commitments. But a chip hub needs huge, stable electricity and about a million tons of industrial water daily.

The government says assessments show the water supply is feasible, and energy ministries are working on dedicated grids for the new sites.

Economists also warn about the cost burden on companies. With hundreds of trillions of won on the line, they say incentives will be key to avoid hurting competitiveness.

Sharing the boom

The announcement comes as South Koreans debate how to share the windfall from AI chips.

In May, presidential policy chief Kim Yong-beom suggested using extra tax revenue from the boom to support startups, basic income for rural and fishing communities, and funding for artists.

Workers are also demanding a bigger slice. Samsung narrowly avoided a major strike in May after agreeing a new bonus deal with its largest union.

For President Lee, the $1.2 trillion bet is about more than technology. It is about jobs, regional balance, and making sure South Korea does not just make the chips that power AI but owns the future that comes with them.