Nam Hyun-woo has worked as a staff writer at The Korea Times since 2013, mostly covering business and politics. He currently belongs to the Business Desk where he covers topics such as emerging tech, AI, ICT and Korea's chaebol community. Prior to joining the team, he was the paper's correspondent for the presidential office of Korea during the Yoon Suk Yeol and Moon Jae-in administrations.
Tight timeline puts southwestern chip cluster plan at risk
An aircraft flies over Gwangju Military Air Base in Gwangsan District, July 7. Yonhap
By Nam Hyun-woo
Editor’s note
This is the final article in a three-part series on challenges facing the planned semiconductor cluster to be built in the southwestern part of the country with a massive investment from Samsung Electronics and SK hynix, and government support for necessary infrastructure. — ED.
As the Korean government pushes to complete a new 800 trillion won ($532 billion) semiconductor cluster in the country's southwestern region and begin mass production there by 2030 — within President Lee Jae Myung's single five-year term — concerns are growing that the tight timeline could put the entire project at risk.
The government stresses that the target is achievable by rolling out measures to address concerns raised by experts over securing sufficient industrial water, power supply, workforce and land, but industry officials argue the timeline is based on the optimistic assumption that every step will proceed without delays.
Given that the downside risks are as significant as the scale of the investment, they say the government should allow for greater flexibility rather than becoming overly fixated on its political timetable.
According to government officials, the central government is accelerating plans to relocate facilities at Gwangju Military Air Base, the site selected for the semiconductor cluster, to nearby Muan County, South Jeolla Province. It aims to begin the relevant administrative procedures this month and officially designate the county as the relocation site.
The relocation of the military air base has been stalled for more than a decade due to neighboring municipalities' refusal to host the facility. The project gained momentum in April, when Muan County was designated as the preliminary candidate site for the relocation.
At the time, Muan County Gov. Kim San said the county would not accept the relocation unless the central government relocates the civilian airport first and provides support measures worth more than 1 trillion won. After the government unveiled the chip cluster plan, however, the county shifted its stance and pledged full cooperation, accelerating the relocation process.
Because the facility serves as a Korea-U.S. Air Force Collocated Operating Base, the relocation also requires consultations with the United States. Cheong Wa Dae said last week that it has already begun discussions with Washington, underscoring its determination to keep the project on schedule.
The Gwangju Metropolitan Government plans to begin construction as early as the end of this year, establish the necessary power and water infrastructure by 2028 and start mass production by 2030.
“If the cluster is set to begin mass production by 2030, it will require an all-out race against time,” Gwangju Mayor Min Hyung-bae said. "We need to work backward from the target date, identify every potential risk and eliminate them one by one. That means managing everything from land, power and water to talent and residential infrastructure.”
Gwangju Mayor Min Hyung-bae speaks during a briefing on housing a semiconductor plant on the site of Gwangju Military Air Base in Gwangsan District, July 7. Yonhap
The central government is also mobilizing every available measure to keep the project on schedule.
To address concerns over water shortages, it is considering nationalizing Dongbok Dam in nearby Hwasun County, currently owned by the Gwangju city government, to accelerate plans to raise the dam's height. Government officials also expressed confidence that electricity demand can be fully met through renewable energy sources and the Hanbit Nuclear Power Plant, with additional reactors under consideration.
“It took seven to nine years just to secure land for the Yongin National Semiconductor Cluster in Gyeonggi Province, but our goal is to shorten the preparation period for the southwestern chip cluster to just two to three years,” Vice Minister of Trade, Industry and Resources Moon Shin-hak said in an interview with a local media outlet on Thursday.
Industry officials say, however, the debate should begin with why chipmakers had originally favored expanding the Yongin cluster instead of building an entirely new semiconductor hub in the country's southwestern region.
Samsung Electronics and SK hynix initially favored concentrating fab expansion in Yongin, where an established supply chain ecosystem and a much easier path for relocating workers gave the region a clear advantage over building a new cluster from the ground up.
“Shrinking a process that took years in Yongin down to two or three years in an unfamiliar location means compressing a series of local approvals and other processes that have historically taken far longer to secure,” an industry official said.
A semiconductor fab is under construction in Yongin, Gyeonggi Province, June 29. Yonhap
The challenge is that all of these measures must be executed on time to meet the government’s goal. The relocation of Gwangju Military Air Base to Muan still requires procedures such as a local referendum, expected to be held around October, while the outcome of consultations with the U.S. military remains uncertain.
Plans to raise the height of Dongbok Dam also hinge on gaining support from local residents in Hwasun County. Expanding nuclear power capacity is equally complex, given expected opposition from local communities.
“It is encouraging that the government is making every effort to assist chipmakers’ investment plans, but the 2030 mass production target is based on the challenging preconditions that all of the preceding measures will be executed exactly as planned without a single delay and that companies will stick to their investment plans," another industry official said.
"If fab construction is delayed or scaled back because of a downturn in the semiconductor market or changes to companies' investment plans following internal reviews, water, power and other infrastructure built in advance by the government could go unused, resulting in depreciation costs."
Accelerating construction to meet the government's timeline also comes at a cost.
The cost of speed is already visible in other sites. Samsung Electronics is speeding up construction of its P5 memory fab in Pyeongtaek, Gyeonggi Province. Samsung E&A, the project's contractor, said in its regulatory filing on April 17 that the value of its structural construction contract for facilities at the P5 complex had more than tripled, from about 550 billion won to about 1.9 trillion won.
"Once the government sets a fixed deadline for the start of mass production, construction costs inevitably rise because the schedule has to be shortened," a third industry official said.
"Given the current upcycle, bringing investment forward may make sense. But with uncertainty over how long the cycle will last, making the 2030 production target the top priority carries risks."