Proposed ban on new chip clusters in capital area raises concerns

Construction is underway for a semiconductor cluster in Yongin, Gyeonggi Province, Jan. 20. Yonhap

The government’s plan to deny support for additional semiconductor industrial complexes in Seoul and surrounding Gyeonggi Province is fueling concerns that it may undermine a chip cluster under construction in Yongin, Gyeonggi Province, backed by a combined 1,000 trillion won ($670 billion) investment from Samsung Electronics and SK hynix.

Although the Yongin cluster will remain eligible for previously promised support, the new plan triggers suspicions that the government may encourage partner companies in the cluster to relocate to noncapital regions.

According to sources familiar with the matter, the government is set to announce the enforcement decree of the Special Act on Strengthening Competitiveness and Supporting the Semiconductor Industry later this month.

The decree will stipulate that semiconductor industrial complexes built in Seoul, Incheon and Gyeonggi Province cannot be designated as “chip clusters” eligible for state support for electricity, water and roads.

The announcement follows the passage of the act in January. The law, which will take effect Aug. 11, states that semiconductor industrial complexes designated as chip clusters must meet requirements set out in the enforcement decree. Until now, those requirements have remained unclear.

The government is said to have decided to incentivize the construction of chip clusters in noncapital regions to address regional depopulation. The act itself also stipulates that the industry minister should consider balanced regional development when designating chip clusters.

After the plan became public, Yongin Mayor Lee Sang-il called for the withdrawal of the proposed enforcement decree.

“The proposal effectively means companies must build semiconductor fabs outside the capital region if they want government support,” the mayor, who is seeking reelection under the main opposition People Power Party, said Saturday.

Amid concerns that the government may refuse to support infrastructure such as electricity, water and roads for the Yongin cluster, he warned that suppliers of semiconductor materials, parts and equipment may choose not to join the cluster.

“President Lee Jae Myung pledged to support Yongin’s semiconductor projects during his campaign, but the government and the ruling party have continued to hinder their progress,” he said.

Although ruling Democratic Party of Korea candidates for the Gyeonggi Province gubernatorial and Yongin mayoral races have pledged support for the cluster ahead of the June 3 local elections, the government has remained ambiguous about its future.

In January, when the president said he could not reverse decisions made by previous administrations, he also raised concerns about securing electricity and water for the cluster. His remarks were widely interpreted by politicians as signaling a preference for Samsung and SK to shift their investments to southern regions.

Prime Minister Kim Min-seok said last month that he agrees with the idea of relocation from a broader policy perspective, while noting that the final decision rests with the companies.

As the election approaches, candidates across party lines in other regions have also pledged to attract semiconductor plants, raising concerns about potential setbacks to the mega project.

Min Hyung-bae, the ruling Democratic Party of Korea’s candidate for Gwangju mayor, wrote on Facebook on Sunday that the government’s decision to ban new semiconductor plants in the Seoul metropolitan area “will become a tremendous opportunity capable of changing the future of the entire regional economy, including Gwangju and South Jeolla Province.”

While the companies involved have remained cautious about commenting on the debate, the Korea Semiconductor Industry Association said the cluster’s location should not be subject to negotiation, emphasizing the need for long-term investment and consistent policy support.

The Ministry of Trade, Industry and Resources said later on Sunday that nothing has been decided regarding the announcement of the enforcement decree.