South Korea’s ruling Democratic Party has proposed legislation that would make it easier for SK Hynix to establish joint ventures with outside investors to finance new semiconductor manufacturing plants, underscoring Seoul’s determination to strengthen its position in the global artificial intelligence supply chain.
The proposed amendment follows President Lee Jae Myung’s broader strategy to transform South Korea into a global AI powerhouse by expanding domestic semiconductor production and securing leadership in advanced memory chips that underpin AI systems.
If approved, the legislation would remove a key corporate governance restriction that has limited SK Hynix’s ability to raise capital for large-scale factory projects at a time when semiconductor manufacturers are embarking on some of the most expensive investment cycles in the industry’s history.
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Under current South Korean law governing strategic industries with cutting-edge technologies, a subsidiary of a subsidiary cannot establish certain joint ventures with outside investors.
Because SK Hynix is owned by SK Square, which in turn is controlled by SK Inc, the memory chipmaker falls under this restriction.
The proposed amendment would allow SK Hynix to establish joint ventures to build semiconductor fabrication plants provided it retains at least a 50% ownership stake, enabling the company to attract external capital while maintaining operational control. The legislation is aimed primarily at SK Hynix because other major South Korean conglomerates, including Samsung Group, maintain different ownership structures that are generally less affected by the restriction.
The proposal comes only days after SK Hynix completed a $26.5 billion U.S. share sale, one of the largest overseas equity offerings by an Asian technology company. While the fundraising significantly strengthened its balance sheet, analysts expect the company to require substantially more capital to finance its long-term expansion plans as AI demand accelerates.
Building cutting-edge semiconductor fabrication facilities has become dramatically more expensive. Advanced memory fabs now routinely require investments running into tens of billions of dollars, driven by increasingly sophisticated manufacturing equipment, higher construction costs, and the transition to next-generation memory technologies.
Lawmakers backing the bill said companies can no longer rely solely on traditional financing methods to support projects of this scale. South Korea needs the “fast construction of fabs to win against other major countries and companies,” the draft legislation states.
The proposed legal change highlights how governments are increasingly reshaping corporate rules to strengthen domestic semiconductor industries amid intensifying competition between the United States, China, South Korea and Taiwan for AI leadership.
SK Hynix has become one of the biggest beneficiaries of the AI boom as the world’s leading supplier of high-bandwidth memory (HBM) chips used alongside Nvidia’s AI graphics processors.
HBM has emerged as one of the semiconductor industry’s most strategically important products because it dramatically increases data transfer speeds between AI accelerators and memory, making it essential for training and deploying large language models.
Demand for HBM has consistently outpaced supply over the past two years, allowing SK Hynix to establish itself as Nvidia’s primary memory supplier and significantly improve profitability.
The South Korean government has responded by unveiling plans to create new semiconductor manufacturing clusters outside the Seoul metropolitan area. Both SK Hynix and Samsung Electronics have pledged to invest about 400 trillion won ($268 billion) each in new semiconductor facilities, making the projects among the largest industrial investments in the country’s history.
Under the proposed legislation, any new joint venture established under the revised rules would be required to locate its headquarters or principal office outside the greater Seoul area, supporting the government’s broader objective of promoting regional economic development while expanding national semiconductor capacity.
The bill follows a global pattern of governments intervening more actively to support semiconductor manufacturing through subsidies, regulatory reforms and industrial policies. The United States, European Union, Japan and China have all introduced major initiatives aimed at securing domestic chip production amid growing geopolitical tensions and concerns over supply chain resilience.
Despite the policy support, investors have remained cautious.
SK Hynix shares fell 8.6% in Seoul trading on Tuesday, extending losses from the previous session as enthusiasm following the company’s Nasdaq debut faded and broader semiconductor stocks remained under pressure.
The near-term share price weakness, however, does little to alter the company’s strategic importance. As hyperscalers, including Microsoft, Amazon, Alphabet, and Meta, continue investing hundreds of billions of dollars in AI infrastructure, demand for advanced memory is expected to remain robust. That will reinforce SK Hynix’s central role in the global AI hardware ecosystem, explaining why South Korean policymakers are moving to give the company greater financial flexibility to fund its next phase of expansion.