Samsung to invest $230 bn to build 5 new chip plants in South Korea

South Korean electronics major Samsung Electronics said on Wednesday that it plans to invest around $230 billion over the next 20 years in the country to build five new semiconductor plants. The initiative is part of the broader government plans to invest close to $422 billion into fields including chips and electric vehicles. 

Samsung said that its new plants will be located near its existing domestic factories. The hub will produce both computer memory chips used for storing data and higher-margin logic chips designed to perform a broader range of functions, the company said. 

The company said that it is planning to expand its presence in advanced chips, anticipating that demand will soar in coming years with the adoption of new technologies such as 5G wireless networks, artificial intelligence and self-driving cars. Apart from semiconductors, the hub will include rechargeable batteries, electric vehicles, robotics, displays and bio-technology.  

In a meeting with economic policymakers and business leaders on Wednesday, South Korean President Yoon Suk Yeol described technology industries as the country's key economic growth engines and strategic assets that are also directly linked to job creation and livelihoods." 

“We will build the world’s largest new ‘high-tech system semiconductor cluster’ in the Seoul Metropolitan area based on large-scale private investment of almost 300 trillion Korean won ($400 billion),” he added.  

(South Korea) has world-class manufacturing capabilities and technologies in various high-tech industries such as semiconductors, secondary batteries, and displays, but (government) support and regulatory conditions have been insufficient, the Trade Ministry said in a statement.

South Korea's plan comes as other technology powerhouses, including the United States, Japan and China, are building up their domestic chip manufacturing, deploying protectionist measures, tax cuts and sizeable subsidies to lure investments. 

In October 2022, The US Department of Commerce released new rules prohibiting US companies from exporting to China the technology, software, and equipment used in producing advanced computing chips and supercomputers. The measures also bar US persons from supporting certain China-based chip companies without a licence from the US government. 

Earlier this month, the Netherlands joined the US' efforts to deny China access to equipment and software essentials to expanding its semiconductor manufacturing capabilities to protect national security. 

Around the same time, South Korea's trade ministry raised concerns over the US policy on semiconductors calling the US a ‘tech hegemony’. The ministry said the Chips Act "could deepen business uncertainties, violate companies' management and technology rights as well as make the United States less attractive as an investment option". 

Samsung, South Korea's biggest company, has seen a dip in its profit in recent months owing to a weak global economy, along with Russia's war on Ukraine and high inflation, depressed demand for its consumer electronics products and memory chips. 

The company's profit for the three months through December 2022 fell close to 70%, partly because chip prices fell sharply as clients adjusted their inventories to reflect economic uncertainties. SK Hynix, another major South Korean chipmaker, reported an operating loss of 1.7 trillion won ($1.3 billion) for the October-December period, which marked its first quarterly deficit since 2012.