Shares of South Korea’s semiconductor heavyweights Samsung Electronics and SK Hynix fell sharply on Monday, even after the government unveiled one of the country’s most ambitious industrial expansion plans.
Samsung Electronics dropped as much as 4.8%, while SK Hynix erased steeper early losses of nearly 6% to trade 1.6% lower, suggesting markets are weighing the financial burden of the planned investments against the long-term growth opportunities created by booming AI demand.
The decline came after President Lee Jae Myung announced sweeping measures to cement South Korea’s position as a global semiconductor and artificial intelligence powerhouse through large-scale investments in manufacturing, data centers and advanced chip technologies.
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Under the government’s new strategy, Samsung Electronics and SK Hynix will each construct two new semiconductor fabrication plants in South Korea’s southwest as part of an 800 trillion won ($518 billion) national semiconductor ecosystem project. The initiative is among the largest industrial development programs ever undertaken by the country and is designed to strengthen every stage of the semiconductor value chain, from manufacturing and packaging to AI infrastructure and supply chain resilience.
President Lee said South Korea must move more aggressively than its global competitors if it is to retain its leadership in the technologies driving the next phase of the digital economy.
Artificial intelligence has become the central battleground for semiconductor manufacturers as demand for AI processors, memory chips and cloud infrastructure accelerates worldwide. Governments across Asia, North America and Europe are competing to attract semiconductor investments amid growing concerns over technological sovereignty and supply chain security.
South Korea’s latest initiative is born out of that intensifying global competition.
Trade, Industry and Energy Minister Jung-Kwan Kim said the government intends to eliminate regulatory bottlenecks that have historically delayed large manufacturing projects.
“We will rapidly expand our production capacity by drastically shortening the timeline from licensing to construction,” Kim said.
Accelerating construction timelines has become increasingly important as countries compete to build capacity before AI-related demand peaks later this decade.
The announcement also follows reports that Samsung Group is preparing an even larger long-term investment strategy. According to South Korea’s Maeil Business Newspaper, Samsung plans to unveil a 1,000 trillion won ($646 billion) investment programme spanning the next decade, covering semiconductor manufacturing, artificial intelligence data centers, advanced semiconductor packaging, batteries and display technologies.
The report said approximately 300 trillion won would be allocated to new semiconductor fabrication plants in southwestern South Korea, while another 360 trillion won would fund the Yongin semiconductor cluster, one of the world’s largest chip manufacturing hubs currently under development.
An additional investment exceeding 350 trillion won would be directed toward building AI data centers to support the explosive growth in artificial intelligence computing. The newspaper did not specify whether some of those investments overlap with the government’s newly announced 800 trillion won ecosystem project.
Although the announcements reinforce South Korea’s commitment to maintaining its semiconductor leadership, investors appeared focused on the enormous capital requirements involved. Building advanced semiconductor fabrication facilities has become significantly more expensive as manufacturers transition to increasingly sophisticated manufacturing processes. A single leading-edge fabrication plant can now cost tens of billions of dollars before entering commercial production.
The spending pressure comes as global chipmakers race to meet unprecedented demand for AI infrastructure while simultaneously expanding research into next-generation manufacturing technologies. Samsung and SK Hynix have become two of the most strategically important companies in the AI supply chain because of their dominance in memory chips.
Unlike conventional computing, generative AI systems require enormous amounts of high-bandwidth memory (HBM), an advanced form of DRAM that allows AI processors to move massive quantities of data at extremely high speeds while reducing power consumption.
HBM has emerged as one of the industry’s biggest supply bottlenecks.
SK Hynix has established itself as the global leader in advanced HBM production and remains Nvidia’s largest supplier of high-bandwidth memory chips powering the company’s AI accelerators. Strong demand from hyperscale cloud providers and AI developers has enabled SK Hynix to deliver record earnings in recent quarters.
Samsung Electronics, meanwhile, has been investing aggressively to close the technological gap with SK Hynix in advanced memory products while simultaneously expanding its foundry business and logic chip operations to compete more effectively with Taiwan Semiconductor Manufacturing Co. (TSMC).
Industry analysts expect demand for HBM to remain exceptionally strong for several years as companies including Microsoft, Amazon, Meta, Google, Oracle, OpenAI and xAI continue building massive AI data centers requiring hundreds of thousands of advanced processors.
The South Korean government’s investment programme is also intended to strengthen domestic supply chain resilience at a time when geopolitical tensions have made semiconductor manufacturing a national security priority.
The United States, China, Japan, Taiwan, and the European Union have each introduced substantial incentives to attract semiconductor production, creating an increasingly competitive environment for global chipmakers deciding where to locate future manufacturing capacity.
By combining government support with private-sector investment, Seoul hopes to ensure South Korea remains one of the world’s leading semiconductor production centers even as rivals dramatically increase spending.
Despite Monday’s share price declines, analysts note that the long-term outlook for Samsung Electronics and SK Hynix remains closely tied to the AI investment cycle, which continues to drive record demand for advanced memory chips. However, investors are increasingly scrutinizing whether the industry’s unprecedented capital expenditure plans will generate returns sufficient to justify the trillions of won now being committed to expanding global semiconductor capacity.