Samsung is investing $230 billion to build a “mega” chip cluster

SEOUL – Samsung Electronics said on Wednesday it expects to invest 300 trillion won ($230 billion) over the next 20 years as part of an ambitious South Korean national project to build the world’s largest semiconductor manufacturing base near the capital Seoul.

The chip-making “mega-cluster” to be built in Gyeonggi Province by 2042 will be anchored by five new semiconductor fabs being built by Samsung. According to South Korea’s Ministry of Commerce, Industry and Energy, it aims to attract 150 more companies that manufacture materials and components or develop high-tech chips.

Samsung’s new factories will be close to existing domestic factories and will produce both computer memory chips for storing data and high-margin logic chips designed for a wider range of functions, the company said.

Samsung, a giant in the global storage business, is trying to expand its presence in advanced chips and expects demand to increase in the coming years with the introduction of new technologies such as 5G wireless networks, artificial intelligence and self-driving cars.

The semiconductor cluster is part of broader government plans announced on Wednesday to boost six key technology industries the country sees as most important to its export-dependent economy. In addition to semiconductors, these include rechargeable batteries, electric vehicles, robotics, displays and biotechnology. The government hopes to attract 550 trillion won ($422 million) in business investment for these projects by 2026.

South Korea’s plan comes as other tech powerhouses, including the United States, Japan and China, ramp up their domestic chip manufacturing and use protectionist measures, tax cuts and sizable subsidies to attract investment. At a meeting with economic policymakers and business leaders on Wednesday, South Korean President Yoon Suk Yeol described tech industries as the country’s “key economic growth engines and security and strategic assets, which are also directly linked to job and livelihood creation.”

“(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 Commerce Ministry said in a statement.

Samsung, South Korea’s largest company, has seen profits fall in recent months as a sluggish global economy, which has been rocked by Russia’s war in Ukraine and high inflation, has weighed on demand for its consumer electronics products and memory chips. The company’s earnings fell nearly 70% in the three months ended December, in part because chip prices fell sharply as customers 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, its first quarterly deficit since 2012.