Korea's semiconductor industry faces a dilemma over where to locate its fabrication plants, or fabs. Investment demands are pouring in not only from abroad but also from regions outside Korea's capital area. While the industry needs to concentrate its resources on the state-led Yongin Semiconductor Mega Cluster, political and diplomatic pressure is holding it back.
Samsung Electronics (005930.KS) and SK hynix (000660.KS) face intense recruitment campaigns from countries around the world, according to industry sources Tuesday. The United States and China are pressing the companies to expand domestic production facilities, wielding massive subsidies and tariff policies. Emerging economies such as Vietnam have also entered the competition to attract packaging (back-end processing) and research and development (R&D) bases, offering sweeping tax benefits and site support.
Amid intense foreign pressure, domestic political circles and local governments outside the capital area have joined the push. According to regional political sources Tuesday, attracting semiconductor facilities is being discussed as a key project for the integrated Jeonnam-Gwangju special metropolitan city, set to launch in July. Min Hyung-bae, the mayor-elect of the integrated Jeonnam-Gwangju special metropolitan city, said the previous day, "Investment plans on a scale that exceeds our expectations have been in preparation for a long time," adding, "There will be an official announcement soon."
The government, which has championed balanced regional development, is also lending weight to such claims. President Lee Jae-myung said at a press conference Sunday, "When pursuing industrial policy, I ask that you invest in the provinces as much as possible." He added, "Among the Honam region, Jeonnam-Gwangju is specified in law to receive integrated special preferential treatment, so it is set to receive benefits."
The semiconductor industry, however, has expressed reluctance. Critics point out that local governments' recruitment claims ignore the realities of "industrial water," an essential resource for semiconductor processes. According to the industry and the government, the industrial water needed when the Yongin semiconductor complex begins operating in 2035 is 764,000 tons per day. By contrast, the daily surplus of industrial water at Saemangeum (Yongdam Dam) in North Jeolla Province, which is seeking the relocation, is only about 180,000 tons. The Yeongnam region (Nakdong River) has water capacity to spare, but its water sources are scattered across some 20 small dams. Building a new large-scale single pipeline network would incur additional costs of more than 4 trillion won.
Seawater desalination, cited as an alternative to water shortages, also has clear limitations, according to the industry consensus. Semiconductor fine processing requires highly refined "ultrapure water." Using unverified water sources could lead to fatal process defects. Production costs are also about 3.75 times higher (1,500 won per ton) than ordinary industrial water (400 won per ton).
Regional dispersion would even destroy the "clustering" effect that is at the core of the semiconductor ecosystem, critics say. The semiconductor industry requires numerous fabless firms (chip contract manufacturers), equipment makers, and materials companies to gather and cooperate in one place. If infrastructure planned for existing areas such as the Chungcheong region is physically split into other regions, logistics costs will rise and crisis response capabilities will inevitably weaken, according to the explanation.
There are also warnings that if domestic infrastructure development is delayed by political logic, investment will head overseas. For example, the Taylor site in Texas owned by Samsung Electronics spans about 5 million square meters. Up to nine additional semiconductor fabs could be built there in the future. An industry official said, "Taylor, where the U.S. government's water and power infrastructure support is certain, actually carries less risk than domestic sites," explaining, "Diverting some of the Yongin complex's volume to Taylor is a scenario that can be fully considered."
Another industry official advised, "Semiconductors are an industry that requires the thorough establishment of a clustering ecosystem," adding, "To avoid falling behind in the global speed race, full-fledged government support for the Yongin cluster infrastructure is urgently needed."
