Debate over Samsung, SK Hynix’s second chip cluster in Korea heats up: Is it feasible?

Debate over Samsung, SK Hynix’s second chip cluster in Korea heats up: Is it feasible?

The Honam region in southwestern S. Korea offers ample land, water, and power for the planned chip cluster, but faces steep hurdles in attracting top-tier engineering talent and supply chain vendors

ByChae-Yeon Kim, Hae-Ryeong Kang and Kwang-Sik Lee / Published: June 28, 2026 at 9:00 AM(KST)

South Korea, home to Samsung Electronics Co. and SK Hynix Inc., is locked in a heated debate over plans by the world’s two largest memory chipmakers to expand advanced production capacity beyond the saturated Seoul metropolitan region into the country’s central and southwestern provinces.

Samsung and SK Hynix may be forced to set up alternative chip hubs in these regions due to severe infrastructure bottlenecks in the tech-heavy capital area, said the plan’s proponents.

The proposal aims to help the chipmaking giants meet surging demand from the rapidly growing artificial intelligence sector by alleviating critical shortages of land, water and power that threaten to cripple existing manufacturing hubs.

Opponents, meanwhile, argue that Samsung and SK Hynix face immense operational risks with the multibillion-dollar project. They note that the Honam region, the leading candidate for the nation’s second chip cluster, lacks the engineering talent and complex supplier networks needed to sustain a cutting-edge fabrication plant, or fab.

INVESTMENT DETAILS EXPECTED ON JUNE 29

Samsung and SK Hynix are expected to announce their investment plans on June 29 at a public-private sector meeting at the presidential office.

Ahead of the meeting, South Korean President Lee Jae Myung and Samsung Chairman Jay Y. Lee on Thursday discussed detailed proposals for a new fab in Honam, a region that encompasses the metropolitan city of Gwangju, South Jeolla province as well as North Jeolla province.

President Lee underscored the strategic necessity of establishing a semiconductor hub in the southwestern provinces.

“If we fail to overcome the single-polar system centered around the capital region, the winds of positive change will turn into a mere breeze, and unforeseen crises could become a devastating storm,” President Lee warned during a meeting with senior aides.

“To overcome this centralization, we must expand large-scale investment in core, cutting-edge industries across regions like Yeongnam, Chungcheong, Gangwon, Jeju, and Honam.”

The government aims to accelerate and balance growth in Asia’s fourth-largest economy, which has emerged as a major beneficiary of the global AI boom.

In response to the government’s policy, Samsung and SK Hynix are leaning toward building as many as five factories in the Honam and Chungcheong regions, spanning both front-end and back-end processes.

The planned expansion also reflects mounting constraints in greater Seoul, where land availability and electricity and water infrastructure are increasingly stretched.

A semiconductor cluster currently being built in Yongin, south of Seoul, is already projected to face a daily water deficit of over 1.1 million tons by 2050, according to data from the National Assembly Research Institute.

GOVERNMENT SUPPORT

The Ministry of Trade, Industry and Energy announced a support package to help the industry expand.

Under a new decree of the Semiconductor Special Act, the state and local governments can bankroll more than 50% – and up to 100% – of foundational infrastructure costs. This includes funding for undergrounding power grids, water supply networks and township development for non-capital clusters.

Even so, global investors, tech executives and the public continue to wonder if such a decentralized expansion is economically viable.

A single modern fab requires over 100,000 square meters (1.1 million square feet) of land, 24 gigawatt-hours (GWh) of electricity and 200,000 tons of water daily.

Even if these requirements are met, many question whether the necessary living conditions can be provided for over 3,000 specialized workers and whether an ecosystem can be created to support dozens of component, material, and equipment suppliers.

LAND IS A NON-ISSUE

With the government effectively formalizing the Honam chip cluster, industry sources note that the southwestern region holds a clear logistical advantage in land supply.

Advanced front-end lithography fabs require massive footprints. For scale, Samsung’s Pyeongtaek P5 Fab 1, currently under construction, spans 130,000 square meters excluding ancillary substations and water treatment facilities.

Land availability is a non-issue for Honam.

Candidate sites like Gwangju Cheomdan District 3, with 3.4 million square meters, and the BitGreen Industrial Complex, at 4.1 million square meters, are similar to or larger than Samsung’s Pyeongtaek semiconductor complex spanning 2.9 million square meters and the Yongin semiconductor cluster with 4.2 million square meters.

WATER QUALITY IS MORE IMPORTANT THAN VOLUME

The Honam region also boasts sufficient water reserves to supply a massive semiconductor complex.

Gwangju can easily match the required water volume by tapping into nearby rivers and reservoirs.

Experts caution, however, that water purity is far more critical than volume, given that semiconductor manufacturing relies on ultra-fine processes that etch circuits at the nanometer scale.

“The quality of local river sources must undergo rigorous validation to ensure they are fit for ultra-pure water processing,” said Hwang Cheol-Seong, a materials science professor at Seoul National University.

ABUNDANT GREEN ENERGY, BUT MUST BE STABLE

A single fab consumes as much electricity as the total output of a large nuclear power plant.

SK Hynix’s manufacturing site in the Yongin cluster is projected to require 5.8 GW of total power, but the world’s leading high-bandwidth memory (HBM) manufacturer has yet to secure a reliable energy source for its third and fourth planned fabs.

Given this massive energy appetite, Honam is widely viewed as an ideal location because it boasts a power self-sufficiency rate of nearly 197%, driven by a substantial surplus of solar, wind, and nuclear energy.

Renewable energy is unstable, however: Weather and seasonal shifts heavily influence power generation from solar and wind farms.

In an industry where a 0.01-second voltage drop can ruin an entire batch of wafers and cause millions of dollars in losses, power grid stability is paramount.

To resolve this volatility issue, the region must expand energy storage systems (ESS), reinforce its transmission grids and integrate renewables with baseload power sources like liquefied natural gas (LNG) plants, industry experts stressed.

“It is essential to build a power grid and storage infrastructure capable of compensating for the output volatility of renewable energy,” said Kim Jinsoo, a resources and environment professor at Hanyang University in Seoul.

HURDLE OF ATTRACTING ELITE TALENT

Industry sources also warn that Honam will face steep hurdles in recruiting elite talent.

While automated back-end packaging can be decentralized, attracting thousands of master’s and Ph.D.-level research and development and yield-management engineers to live outside the greater Seoul area is notoriously difficult.

Semiconductor industry experts see Pyeongtaek and Icheon, roughly 70-80 kilometers (43-50 miles) from Seoul, as the “psychological borderline” for top-tier tech talent in South Korea.

Samsung Display Co. struggled to relocate elite staff when it opened a production complex in Asan, South Chungcheong province, some 100 kilometers south of Seoul.

Analysts argue that substantial, performance-linked cash bonuses and premium residential infrastructure are the only ways to draw top-tier talent and mitigate turnover.

“For engineers who have experienced massive bonus windfalls during semiconductor upcycles, guaranteed financial rewards can act as a powerful lock-in effect,” said Kim Yang Paeng, a senior research specialist at the Korea Institute for Industrial Economics & Trade.

SUPPLIER NETWORK

A cutting-edge fab requires 50 to 100 specialized material, component and equipment suppliers stationed nearby to provide real-time maintenance and supply chain security.

Unlike multinational conglomerates, many mid-sized tier-1 and tier-2 suppliers do not have sufficient capital for fresh investment in the Honam region.

The solution relies entirely on economies of scale.

Proponents note that when Samsung committed tens of billions of dollars to a mega-site in Taylor, Texas, it soon spurred many of its domestic suppliers to flock there.