US, Japan emerge as Korean chipmakers' production bases amid AI boom

The United States and Japan are emerging as the next key production bases for Samsung Electronics and SK hynix, as the chipmakers accelerate capacity expansion to meet surging demand for artificial intelligence (AI) semiconductors.

Both countries offer advantages, with the U.S. allowing greater proximity to major customers including Nvidia and Tesla, as well as incentives that could help offset investment costs and potentially reduce exposure to semiconductor tariffs from the Donald Trump administration.

Japan has a well-established ecosystem of chip equipment and materials suppliers, reliable power and water supplies in some regions and substantial government subsidies for semiconductor investments.

For chipmakers, the choice of location extends beyond customer proximity, with reliable supplies of electricity and water and government incentives becoming increasingly important as companies commit billions of dollars to new fabs.

“Companies look closely at incentives, including infrastructure and subsidies,” an industry official said. “They first need to assess whether water and electricity can be supplied easily.”

Japan has recently gained particular attention from SK hynix as a potential manufacturing base. The country is home to major semiconductor equipment and materials suppliers, such as Tokyo Electron. TSMC, which manufactures the base die for SK hynix’s high-bandwidth memory 4 (HBM4), operates fabs in Kumamoto and Micron produces DRAM in Hiroshima.

The Japanese government has also offered substantial financial support to attract chip investment. It plans to provide up to 1.2 trillion yen ($7.73 billion) in subsidies for TSMC’s first and second Kumamoto fabs and as much as 500 billion yen for Micron’s expansion in Hiroshima.

SK Group Chairman Chey Tae-won also signaled growing interest in Japan. In an interview with Japan’s Asahi Shimbun earlier this month, Chey said joint production with Kioxia was “one option” and that the companies could also cooperate on research and development, supply-chain sharing and potentially building a factory together.

“Even considering risks and cultural aspects, it is a very attractive candidate,” Chey said.

The chairman has cited Japan’s concentration of semiconductor equipment and materials suppliers and its strong manufacturing base as key advantages, saying SK Group was looking across the country for potential sites.

However, the U.S. remains a key option as Washington steps up pressure on foreign chipmakers to expand domestic production.

Samsung Electronics is building an advanced foundry in Taylor, Texas, with the first fab expected to begin production by the end of this year and a second fab under review for additional capacity. Tesla’s next-generation AI5 chip is expected to be produced at the site using the company’s 2-nanometer process.

The U.S. government has committed up to $4.7 billion in direct funding to support Samsung Electronics’ semiconductor investment in Texas.

Meanwhile, SK hynix last month broke ground on an advanced packaging and research facility in Indiana, where it plans to package HBM using memory wafers produced in Korea. The facility is scheduled to begin mass production of HBM4E in the third quarter of 2029.

Washington’s push has intensified as the Trump administration prepares targeted tariffs on semiconductors.

"I think what you're going to see is targeted, thoughtful tariff policy that basically says if you build here, you don't pay, but if you don't build here, expect to pay to enter the greatest market in the world," U.S. Commerce Secretary Howard Lutnick said in a CNBC interview on Wednesday (local time), increasing pressure on Samsung Electronics and SK hynix to expand local manufacturing.

The pressure comes as both companies are also accelerating investment at home. SK hynix recently approved 54.3 trillion won for new fabs in Yongin, Gyeonggi Province, and Cheongju, North Chungcheong Province, to expand DRAM and NAND production, while Samsung Electronics is advancing plans to expand its domestic semiconductor footprint, including new fabs in Gwangju.