Yongin national chip cluster construction begins this month amid compensation, fast-track risks

YONGIN, Gyeonggi Province — Korea’s ambitious plan to expand domestic semiconductor production capacity and strengthen its position in the global chip supply chain will take another step forward this month, as construction is set to begin on the Yongin Semiconductor Cluster National Industrial Complex in Gyeonggi Province this month.

The initiative, however, is not free from possible delays, including compensation for residents and businesses already at the site and pressure to meet fast-track construction deadlines ordered by President Lee Jae Myung, who is determined to capitalize on soaring artificial intelligence (AI)-driven memory demand before it cools.

Two semiconductor clusters are currently planned in Yongin’s Cheoin District. One is the Yongin Semiconductor Cluster General Industrial Complex, where SK hynix is already building its memory chip fabs, and the other is the Yongin System Semiconductor Cluster National Industrial Complex, which is set to break ground this month and will house Samsung Electronics’ foundry and memory fabs.

The Korea Land & Housing Corp. (LH), under the Ministry of Land, Infrastructure and Transport, is overseeing the national complex project and has selected a consortium led by Daewoo E&C as the constructor to lead what the government describes as one of the world's largest chip clusters.

As the president has stressed the need to move quickly to avoid missing the current AI-driven chip boom, the government designated the national cluster as a fast-track project, cutting the time required for administrative procedures by half compared with other infrastructure projects and pushing LH and Samsung Electronics to complete the project by 2040, seven years ahead of the original schedule.

The project has progressed at an accelerated pace since Yongin was selected as a candidate site in March 2023. According to LH, the industrial complex plan was approved in just one year and nine months, two years and nine months faster than the average for national industrial complex projects.

The pace has accelerated further under the Lee administration. Compensation procedures began one year and seven months earlier than the average for previous projects, while the selection of bidders for planning and construction came 10 months earlier.

The time-pressed schedule has drawn criticism over unresolved issues surrounding the project. The Korea Federation for Environmental Movement on Monday criticized the Lee administration, saying construction is moving forward despite unresolved compensation disputes with landowners and complaints among local communities in Cheoin District over plans to build new power transmission towers and secure water supplies for the fabs.

During a rally at the National Assembly, the activist group claimed that more than half of the landowners have refused LH’s compensation proposals and oppose the construction.

LH refuted the claim, saying most of the landowners and businesses have agreed to relocation.

“Compensation procedures have been completed or advanced to settlement stages for 99 percent of the privately owned land subject to compensation," said Yoon Ki-jong, general manager of the LH’s Yongin Project Division and Compensation Marketing Team.

"Forty-three percent have agreed to our restitution proposals, while the rest have rejected our proposals and sought a higher level of compensation by submitting applications for adjudication on expropriation. We are in need of their cooperation. ... We have secured a new location (in the site’s vicinity) to move their homes, livestock and businesses. The discussion is still underway.”

There are also 27 designated locations within the site where surveys for buried cultural heritage are underway. Kim Sung-gul, general manager of LH’s Complex Development 1 Team, said one of the locations has been cleared, while negotiations over access to the remaining areas are still underway.

"Part of the site on mountains are owned by family clans enshrining their ancestors there. We’re trying to compensate them for their ownership of the lands,” he said.

It remains to be seen whether the project’s fast-track schedule is feasible, and whether they can meet the deadlines for planned infrastructure including six fabs, three liquefied natural gas power plant units, an electrical substation, new housing for the residents, a highway expansion running through the cluster and a commercial/leisure sector for workers of the cluster and their families. The project’s groundbreaking later this month was also originally scheduled for December.

“Priority sectors we must complete the fastest are the fabs, substation, power plants, wastewater treatment facility and retention basin, which are essential infrastructure for Samsung Electronics that will use the cluster,” Kim said. “To save our timeline, we’re simultaneously progressing what we can, like the restitution and arranging the site together, or fab construction and planning areas outside the fabs together.”

LH aims to complete site preparation in time for construction of Samsung Electronics’ first fab to begin by 2028. Of the national cluster’s total 7.78 square kilometers, the first construction zone covers 3.45 square kilometers, including the site for Samsung Electronics’ first fab. A consortium led by Daewoo E&C was selected as the contractor with a bid of 868.6 billion won ($640 million) to carry out site development and infrastructure work. LH is scheduled to sign the construction contract with the consortium later this month.

The initial phase of construction will involve arranging the site by blowing up mountains and carrying off 50 million tons of earth, requiring safety measures like an artificial intelligence-based crash prevention system and special explosives and primers to maximize each blast’s effect. Six fabs with a total of 36 pipelines will be built on the arranged site. With two fabs forming a set, each set of fabs will have a total floor area equal to 10 Lotte World Towers put together, according to Kim.

"To fast-track the cluster, we are breaking away from conventional business practices and actively driving rule-breaking innovations, such as running processes in parallel, to accelerate our momentum,” LH CEO Lee Seong-hoon said during a press conference in Yongin Wednesday. “To support the successful completion of the Lee administration’s three megaprojects, we will work in close cooperation with business operators and relevant agencies to complete the industrial complex ahead of schedule."