South Korea bets US$576 billion on locking in its grip on AI memory

Seoul is pouring more than half a trillion dollars into Samsung and SK Hynix fabs to defend a memory dominance that markets are already pricing as a gamble.

South Korea wants to make its hold on AI memory permanent. President Lee Jae Myung on Monday unveiled more than US$576 billion in chip and AI investment, a state-backed drive centered on the two companies that already determine how much high-bandwidth memory the AI industry can buy: Samsung Electronics and SK Hynix.

The scale is the headline. Samsung and SK Hynix, together with their suppliers, will spend 800 trillion won (about US$518 billion) to build two new fabrication sites each in the country's southwest, industry minister Kim Jung-kwan said. Gwangju and South Jeolla province will add 5 trillion to 20 trillion won, with a further 81 trillion won earmarked for a packaging cluster in Chungcheong, near Seoul.

Samsung chairman Jay Y. Lee confirmed Gwangju as the site for its new cluster. SK Hynix chairman Chey Tae-won said his firm still needs time to settle on a location and secure power and water in the region. Lee, flanked by the two chairmen at a televised address, framed the package as a "great leap forward" resting on what his government calls the triple axis of semiconductors, physical AI and data centers.

"We must secure the core elements of AI faster than any other country," he said. The reason this matters well beyond Korean politics is supply. The two firms sit on the memory that AI accelerators cannot run without. SK Hynix holds an estimated half or more of the high-bandwidth memory market and close to 70% of Nvidia's HBM orders, with Samsung supplying much of the rest, according to industry trackers.

Kim said Korea will also double DRAM output within five years, bringing forward Seoul-area fab construction to the mid-2030s. HBM is built by stacking DRAM, so that capacity flows straight into the memory that servers, AI clusters and downstream hardware pricing all lean on.

Markets did not read the announcement as a clean win. Samsung and SK Hynix closed down 4.86% and 1.68% on Monday, with some analysts cautioning that the wave of new capacity could tip memory into oversupply. That worry sits against a familiar pattern. Memory is a cyclical business, and the current AI-driven run has been lifted by a DRAM shortage that Goldman Sachs in April called the tightest in 15 years.

Capacity built for a shortage tends to arrive just in time for the glut. Lee Jong-ho, a professor at Seoul National University, questioned the pace rather than the ambition. The plan "still appears to be moving too fast," he said, warning that if demand were to fall, the consequences would be severe. Chey's own words carried the weight of someone who has built one of these clusters before.

"It took us nine years to create a cluster in Yongin," he said, adding that a fab demands land, power, water and talent in volumes a new region may not supply on schedule. The southwest siting has drawn fire at home. Opposition figures have questioned the politics, noting that 85% of the region's voters backed Lee in last year's election, and his approval rating has slipped for six straight weeks to 46.5%, according to pollster Realmeter.

Lee defended the location over the weekend, rejecting claims that it rewards a political stronghold. What the plan cannot legislate is to demand a decade or two out. Seoul is wagering that the AI build-out runs long enough to absorb half a trillion dollars of fresh memory capacity.

Samsung and SK Hynix have spent years turning their HBM lead into pricing power that the rest of the industry plans around. Whether that lead survives the capacity now being poured into the southwest is the question, Monday's announcement opened rather than answered.