Accelerated Yongin investment well within Samsung, SK hynix financial flexibility: S&P

Economists at S&P Global Ratings attend a press conference in Seoul, Tuesday. Korea Times photo by Lee Hyo-jin

Samsung Electronics and SK hynix have sufficient financial flexibility to accelerate planned investment in the Yongin semiconductor cluster, S&P Global Ratings said Tuesday, easing concerns that the chipmakers' upcoming investment package could weigh on their financial stability.

Speaking at a media briefing in Seoul, Jeremy Kim, associate director for Asia-Pacific corporate ratings at S&P Global Ratings, said the timing of the planned investment in the chip cluster in Yongin, Gyeonggi Province, could be brought forward, resulting in a modest increase in capital expenditure over the next two years.

"There could be some increase in capital expenditure this year and next, but both SK hynix and Samsung Electronics have sufficient financial capacity to absorb that through their free cash flow," Kim said.

The comments came a day after Samsung Electronics and SK hynix unveiled an approximately 4,700 trillion won ($3.4 trillion) investment package, including about 3,500 trillion won earmarked for expanding production of advanced semiconductors and artificial intelligence (AI) data centers.

Samsung Electronics said it will accelerate the completion of its chip fabrication plants in the Yongin to 2040, seven years ahead of its previous target, while SK hynix will bring forward the completion of its cluster to 2033 from 2045.

The two companies also plan to invest 800 trillion won in the Jeolla region.

The S&P economist was more cautious about the proposed investment in the Jeolla region, saying the projects remain at an early stage.

"There is still limited visibility regarding the detailed plans and timeline, so it requires further monitoring," he said. "Given the need to expand production capacity, we expect both companies to continue investing while maintaining financial discipline."

Separately, Kim said S&P expects the AI-driven semiconductor supercycle to continue through 2027, with the balance between expanding production capacity and demand becoming the key issue from 2028.

"We expect the semiconductor supercycle to continue through 2027. From 2028, the key question will be how supply growth matches up with demand," he said. "Ultimately, demand is what matters most. The biggest thing we should be watching is how hyperscalers adjust their investment in AI data centers and whether they continue ramping up spending or begin making meaningful cuts."

Kim noted that Korea is seeing a widening gap between the semiconductor industry and other sectors. "Growth has become concentrated in semiconductors, while other industries have either seen only modest growth or come under pressure from external factors."