South Korea pumps over €450 billion into chips and AI through Samsung and SK Hynix

South Korea has announced a national investment programme worth the equivalent of over €450 billion, targeting the semiconductor and AI industry. The two largest chipmakers in the country are set to play a central role: Samsung Electronics and SK Hynix will each build two new production facilities. The programme is intended to strengthen South Korea's position in the global chip market at a time when countries worldwide are investing heavily in domestic semiconductor capacity.

The announcement was made by the South Korean president, as reported by CNBC. Despite the scale of the package, investors were cautious on Monday: shares in both Samsung and SK Hynix closed lower. This pattern, whereby large-scale industrial investments are initially met with a negative market reaction due to high capital expenditure and uncertain payback periods, is commonly seen with announcements of this kind.

Four new factories split between two companies

Samsung Electronics and SK Hynix will each be responsible for constructing two chip factories. Further details regarding exact locations, the production focus of each of the four facilities, and the individual investment amounts per company have not been confirmed based on the available source material. The total amount of over €450 billion relates to the broader national programme, of which the factories form one component.

Samsung and SK Hynix are globally leading producers of NAND flash memory and HBM (High Bandwidth Memory), respectively. HBM is the memory type in high demand for the production of AI chips, including for systems made by Nvidia. SK Hynix is currently considered the market leader in that segment. New production capacity therefore directly aligns with the sharply increased demand from the AI sector.

National programme as a response to the international chip race

The South Korean initiative fits within a broader international trend in which governments are actively steering domestic semiconductor capacity. The United States is doing so through the CHIPS and Science Act, deploying tens of billions of dollars to bring chip production to American soil. The European Union has the European Chips Act, which pursues a comparable goal for Europe. Japan and Taiwan also have substantial national programmes in place.

South Korea has long been among the top players in the global semiconductor industry, but is facing increasing competition, particularly from China. Beijing has been investing heavily in domestic chip design and production in recent years, partly driven by export restrictions imposed by Western countries on advanced semiconductor technology. The South Korean programme is in part a response to these shifting dynamics.

Investors keep their distance despite the scale of the announcement

It is by no means a given that large-scale state programmes are met with enthusiasm on the stock market. In the case of Samsung and SK Hynix, both stocks lost ground on Monday, according to CNBC. One possible explanation is that investors are weighing the high capital expenditure against uncertainty over demand and margins in the longer term.

The memory chip market is cyclical in nature: periods of strong demand and high prices alternate with oversupply and shrinking margins. The recent surge in AI hardware demand has significantly boosted demand for HBM, but whether that demand will remain at this level in the coming years is uncertain. New factories also require years of development before reaching full capacity, meaning the investment will only generate returns over time.

What this means for the European chip and AI agenda

For European policymakers and investors, the South Korean programme provides a point of reference. The European Chips Act makes €43 billion available through 2030, a fraction of what South Korea is now announcing for a considerably smaller economy. This illustrates how heavily other regions are weighting advanced semiconductor production in their industrial policy.

For Dutch and European AI founders, the indirect impact is relevant: the availability and price of AI chips are partly determined by investment decisions such as this one. Additional production capacity for HBM could, in time, contribute to greater availability of the hardware on which large AI models run. Whether this also leads to lower costs for smaller players depends on how global demand develops further. ASML, which as a supplier of lithography equipment is directly involved in new chip factories worldwide, may also see order flows from this programme, though no concrete statements to that effect can be made based on the current source material.