South Korea unveils US$576 billion AI semiconductor cluster to secure tech leadership

BEIJING, 23 JULY 2026 —

South Korea will build a US$576 billion AI semiconductor cluster in Gwangju city and South Jeolla province, President Lee Jae Myung announced on June 29, aiming to safeguard its lead in global AI supply chains.

The mega project, backed by Samsung Electronics and SK Hynix, targets three pillars: semiconductor design and manufacturing, physical AI systems, and data centres. Samsung and SK Hynix already supply 80-90% of the world’s high-bandwidth memory (HBM) chips, key to AI accelerators and data centres, but South Korea lags in logic chips and foundry services where Taiwan’s TSMC dominates.

The plan responds to surging demand for AI chips and intensifying competition from China. South Korea’s semiconductor exports hit a record US$44.8 billion in June, nearly triple the prior year, driven by memory chip demand. Yet Beijing’s push to build domestic capacity—including US$150 billion in state-backed funds—threatens South Korea’s edge in less advanced memory production, analysts say.

“The new cluster is a strategic imperative to fend off Chinese competition,” said Troy Stangarone, non-resident fellow at the Carnegie Mellon Institute for Strategy and Technology. “It also reinforces the US-led AI ecosystem by supplying advanced semiconductors while minimising Chinese advances in memory.”

The project aims to decentralise South Korea’s tech industry from its traditional hubs in Suwon, Hwaseong, Pyeongtaek and Icheon, where Samsung and SK Hynix operate memory fabs. Gwangju and South Jeolla were not traditional industrial centres; their selection drew criticism over infrastructure and talent shortages. Opposition parties alleged political motives, as the region leans liberal.

Lee defended the choice on July 2, calling capital-region congestion “burdensome even for companies.” He cited a 2023 survey commissioned by the previous administration that ranked Gwangju and South Jeolla as best-prepared for high-tech manufacturing, citing abundant industrial water, solar and wind power to meet RE100 renewable energy commitments by Samsung and SK Hynix.

RE100 is a global initiative for 100% renewable electricity sourcing.

Yet attracting skilled workers may prove harder. A July 3 JoongAng Daily opinion piece argued Gwangju and South Jeolla lack major business leaders, manufacturing employment and a middle class. Wendy Teo, South Korea correspondent for The Straits Times, noted the region’s limited high-tech talent pool.

“While infrastructure can be built over time, the lack of skilled labour will be the biggest constraint,” said Stangarone. The cluster’s success hinges on whether government investment in education and urban infrastructure can overcome these gaps.

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