Samsung Electronics and SK Hynix have announced a combined investment plan of nearly $600 billion to expand chip production in South Korea, alongside government support. This initiative aims to build new manufacturing facilities in less developed regions of the country as demand for memory chips surges, particularly driven by the AI industry. Each company will construct two plants in the southwestern region and develop a central chip-packaging cluster. The effort is part of South Korean President Lee Jae Myung's 'Three Mega Projects' to enhance technological capabilities and redistribute economic growth. Despite the optimistic outlook, analysts warn of potential oversupply as new capacity takes time to become operational.

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Samsung and SK Hynix plan $600bn chipmaking expansion

Companies to invest alongside South Korean government in factories to meet surging demand for memory chips

From left, SK chair Chey Tae-won, South Korean President Lee Jae Myung and Samsung chair Lee Jae-yong unveiled a huge chip investment plan on Monday© Kim Min-hee/EPA/Shutterstock

Song Jung-a in Seoul

PublishedJune 29 2026

UpdatedJune 29 2026

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South Korea has announced a nearly $600bn plan for the world’s two largest memory-chip makers to significantly expand capacity as the AI boom exacerbates chip shortages.

Samsung Electronics and SK Hynix will invest a combined Won911tn ($590bn) alongside the government to build chipmaking facilities in under-developed parts of South Korea, President Lee Jae Myung said on Monday.

The investment pledges are part of the president’s “Three Mega Projects for the Great Leap Forward” initiative aimed at building up the country’s capabilities in semiconductors, AI data centres and robotics.

The plan is also part of Lee’s effort to rebalance economic growth, which is historically concentrated around Seoul. Samsung and SK Hynix have major chipmaking facilities in the capital region.

South Korea was “at a turning point for a new great leap forward”, Lee said. “We must swiftly complete the chip production hubs under construction and secure overwhelming manufacturing capacity through large-scale investment in the south-west.”

Samsung and SK Hynix will each build two chipmaking plants for a total of Won800tn in the country’s south-western region, while Won81tn will be spent on constructing a chip-packaging cluster in the central region.

Chip packaging is the final stage of semiconductor manufacturing, where finished chips are enclosed in protective casings and connected for use in electronic devices.

South Korea also plans to invest Won30tn over the next 15 years to develop next-generation memory chips, on-device AI chips, AI server chips and semiconductors used in defence.

Samsung shares fell 4.4 per cent on Monday, while SK Hynix closed down 2.9 per cent.

South Korea’s chipmakers are racing to meet surging demand from the data centres that power chatbots and other AI tools. The world’s five largest AI companies are expected to spend more than $1tn in 2025 and 2026 on data centres.

Their demand has raised prices for other customers, including consumer electronics makers. Last week, Apple raised MacBook and iPad prices, citing the “unsustainable” cost of memory and storage.

Samsung and SK Hynix now have a combined market capitalisation of roughly $2tn. They account for nearly 80 per cent of the global market for high-bandwidth memory chips, which enable the rapid movement of the massive volumes of data required for AI applications.

Lee has sought to preserve South Korea’s technological edge as Samsung and SK Hynix build new manufacturing facilities in the US amid President Donald Trump’s push to reshore semiconductor production.

On Monday, Seoul said it expected the country’s production capacity for D-Ram chips, which are used to store data temporarily while a processor is running, to double in five years.

Jing Jie Yu, an analyst at Morningstar, cautioned that the mega projects could lead to long-term oversupply unless AI companies kept up their spending.

“Demand outpaces supply initially as fresh capacity takes two to three years at the minimum to come online but often leads to oversupply in tail years as peak capacity is brought up at the moment demand tapers off,” he said in a note on Monday.

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