The rapidly expanding artificial intelligence (AI) industry lies behind Samsung Electronics' (005930.KS) consideration of building a new semiconductor packaging (back-end) plant in Gwangju. AI, once limited to simple searches, is evolving into agentic AI that performs professional tasks as its reasoning capabilities advance dramatically.
This is changing demand in the semiconductor industry. Global Big Tech companies have begun ordering ultra-high-performance AI chips, such as high-bandwidth memory (HBM), in the form of application-specific integrated circuits (ASICs) tailored to their own business models to improve reasoning capabilities. The base die that handles computation support in HBM4, which is mounted on Nvidia's next-generation AI accelerators, has begun to be produced in custom form, and demand for ASICs is expected to grow further with HBM4E and HBM5.
ASIC chips require advanced packaging capabilities because they are designed and manufactured according to customer orders. The performance of high-performance semiconductors depends on the ability to combine multiple chips, such as DRAM, into what functions as a single chip. Accordingly, Samsung Electronics is reviewing plans to build a new advanced packaging plant to meet the changing demand in the AI chip market.
Samsung Electronics' construction of a new packaging base would be its first in 35 years since the establishment of the Onyang campus. Including front-end lines such as DRAM and NAND flash, it would be the first in 11 years since the Pyeongtaek campus broke ground.
The physical conditions of the semiconductor industry ecosystem centered on the Seoul metropolitan area have also reached their limits. Even when attempting to expand facilities on a large scale to match the AI revolution, finding suitable sites is not easy in the first place. The capacity to supply power and water in the metropolitan area has also run out. In addition, with the government pursuing balanced regional growth showing considerable willingness to support investment outside the metropolitan area, the timing appears to have been judged ripe for expanding the semiconductor industry.
"In the past, there was a strong perception that it was difficult to move out of the metropolitan area, because a semiconductor cluster requires not only Samsung Electronics or SK hynix but also some 40 materials, parts and equipment companies to move in at once," a government official said Tuesday. "But now it is increasingly difficult to find sites for a large-scale cluster in southern Gyeonggi Province, and it is a fact that various costs, starting with land prices, are rising." Considering power and water supply as well, building a semiconductor cluster somewhere other than southern Gyeonggi is emerging as a reasonable choice, he said.
In fact, Samsung Electronics already operates memory and foundry facilities and research and development (R&D) centers in Yongin, Hwaseong and Pyeongtaek in Gyeonggi Province. Its "packaging" facilities, which correspond to the back-end of semiconductor manufacturing, have already extended to the Chungcheong region, including Cheonan and Asan in South Chungcheong Province. SK hynix (000660.KS) also has production bases not only in Icheon and Yongin in Gyeonggi Province but also in Cheongju in North Chungcheong Province. The domestic production facilities of the country's top two chipmakers are all gathered within a 50-kilometer radius centered on Pyeongtaek, located on Asan Bay.
The consensus inside and outside the industry is that building a semiconductor cluster in a provincial area is not difficult. "In the case of Taiwan's TSMC, its production bases start from the Hsinchu complex centered on the metropolitan area and extend all the way to Kaohsiung in the south," an industry official said. "Isn't Japan attracting semiconductor plants to Kumamoto at the southwestern tip of Kyushu and developing Sendai in the northeastern part of Honshu into a semiconductor industry base?" While cutting-edge R&D or demonstration facilities may be located in large cities where talent gathers easily, production clusters can be built anywhere else, he said.
It must also be considered that the Lee Jae-myung administration is pouring its policy capabilities into balanced regional growth, breaking away from a metropolitan-centered approach. President Lee Jae-myung has said of balanced regional growth that it is "not consideration or charity, but a strategy for the nation's survival," and even at a meeting with the heads of the top 10 conglomerates, he encouraged regional investment, saying, "In the long run, there may be even greater opportunities in the provinces."
Hyundai Motor Group's earlier announcement that it would invest 9 trillion won in the Saemangeum area of North Jeolla Province to turn it into a global forward base for hydrogen, robots and AI is also an extension of this trend. The point is that Samsung Electronics and SK hynix could enjoy two benefits at once: escaping the saturated metropolitan area and receiving active policy support from the government. The Ministry of Trade, Industry and Energy has also put forward "5 Poles and 3 Special Zones," a plan to craft growth strategies by regional metropolitan area, as a key task, and intends to support companies that relocate their business sites to the provinces with various tax benefits as well as regulatory improvements and workforce development. The Ministry of Climate, Energy and Environment also plans to introduce a region-differentiated electricity rate system in the second half of the year, under which electricity rates become cheaper the farther away from the metropolitan area, easing the cost burden on industry.
Local political circles have expressed their intention to actively support investment by Samsung Electronics and SK hynix if it takes concrete shape. Min Hyung-bae, mayor of the Jeonnam-Gwangju Integrated Special City, said at a "Semiconductor Fab Attraction Strategy Debate" held at the Gwangju City Council on Monday, "Gwangju and South Jeolla are candidate sites well-equipped with various infrastructure," adding, "Before long, there will be good news related to semiconductor plants." Rep. Jung Jin-wook of the Democratic Party of Korea, whose constituency is in Gwangju, also pledged, "At the National Assembly level, we must support budgets and systems, and strategically tie together industrial talent, energy and water issues to come up with support measures," vowing, "I will fulfill my given role so that Gwangju can leap forward as a semiconductor production base."
