South Korea bets $648bn on AI chips to counter China's semiconductor push

South Korea is marshaling more than $600 billion in public and private capital to secure its position as the world's dominant AI chip supplier, pitting Samsung Electronics Co. and SK Hynix Inc. against Chinese rivals racing to close the technology gap.

"The AI infrastructure buildout is a one-time opportunity for South Korea's semiconductor ecosystem," said researchers tracking the sector. "No other country combines memory chip dominance, foundry capacity, and government backing at this scale."

Samsung's reported plan includes 1,000 trillion won ($648 billion) over the next decade for AI data centers and semiconductor facilities, while the government's broader initiative targets $576 billion in chip investment anchored by Samsung and SK Hynix. The proposals would expand production beyond the Seoul metropolitan region into multiple provinces, creating new employment and infrastructure opportunities across the country.

For investors, the question is whether South Korea can execute at this scale. AI infrastructure demands reliable electricity, advanced cooling systems, skilled engineers, and regulatory stability — all requiring complementary public investment. Samsung and SK Hynix shares could benefit from the strategic tailwind, but the payoff depends on execution over the next decade.

The Scale of South Korea's AI Chip Ambition

The reported 1,000 trillion won proposal would make Samsung one of the largest corporate investors in AI infrastructure globally, surpassing the combined AI capex plans of major US technology companies over a comparable period. The investment would cover AI data centers, new semiconductor fabrication facilities, and high-bandwidth memory (HBM) production lines — the specialized memory chips that power Nvidia Corp.'s AI accelerators.

South Korea already dominates the HBM market, with Samsung and SK Hynix controlling more than 90% of global supply. The new investment aims to extend that lead as demand for AI memory chips surges. HBM is expected to become a $100 billion-plus market by 2030, according to industry estimates, up from roughly $20 billion in 2025.

The government's parallel $576 billion initiative, expected to be unveiled by President Lee Jae Myung, includes tax incentives, infrastructure support, and streamlined permitting for chip facilities. The program targets the entire AI value chain — from memory and logic chips to cloud data centers and AI software platforms — rather than relying solely on South Korea's established strength in memory manufacturing.

Competitive Pressure From China

The strategic push comes as Chinese chipmakers, backed by state funding and technology transfer initiatives, accelerate their own AI semiconductor programs. Companies including Huawei Technologies Co. and Semiconductor Manufacturing International Corp. are developing domestic alternatives to Nvidia's GPUs and HBM products, threatening South Korea's market share in the long term.

China's AI chip market is projected to reach $80 billion by 2030, and Beijing has made semiconductor self-sufficiency a national priority under its "Made in China 2025" industrial policy. South Korea's response — combining corporate investment with government incentives — mirrors the approach taken by the US Chips Act, which allocated $52.7 billion to domestic semiconductor manufacturing.

TSMC, the Taiwan-based foundry leader, also looms as a competitive factor. While Samsung Foundry has struggled to win major AI chip contracts from Nvidia and Advanced Micro Devices Inc., the new investment could fund the process node upgrades needed to challenge TSMC's dominance in logic chip manufacturing.

Investor Implications

Samsung Electronics trades at roughly 15 times forward earnings, a discount to TSMC's 20 times multiple, reflecting investor caution about its foundry business and memory chip pricing cycles. SK Hynix, more narrowly focused on memory, commands a higher premium given its leadership in HBM production.

If South Korea's investment plans materialize as reported, both companies could see valuation re-rating as the market prices in sustained AI-driven demand. However, the capital intensity of the buildout — Samsung alone may need to allocate more than $60 billion annually — raises questions about shareholder returns and dividend sustainability.

The coming months will reveal whether Samsung formally confirms the 1,000 trillion won proposal and provides details on financing, project locations, and expected returns. For now, the scale of the ambition signals that South Korea intends to compete not just in chips, but in the entire AI infrastructure stack.

This article is for informational purposes only and does not constitute investment advice.