South Korea unveils $1 trillion chip and AI plan as regional rivals pour billions into the race

South Korea has announced that it is lining up about $1 trillion to invest in semiconductor manufacturing, AI data centers, and robotics infrastructure across the country.

The country’s president, Lee Jae-myung, stated that the investment is essential for South Korea to keep pace with its neighbors who are already spending heavily on the same technologies.

The plan, unveiled Monday alongside the leadership of Samsung and SK Hynix, arrives as Japan commits $65 billion to physical AI by 2040. Taiwan also funds a national robotics center backed by $629 million, among other investments, and China has been bullish in its chip production, especially in the face of US trade restrictions.

For South Korea, standing still is not an option.

Are Samsung and SK Hynix anchoring the spending?

Samsung reportedly disclosed that it would be investing 2,655 trillion won across domestic operations. Samsung reportedly stated that it is setting 2,030 trillion won of that total for semiconductor clusters in Pyeongtaek and Yongin. The remaining 625 trillion won is going towards investments in AI chip fabrication, robotics, batteries, and IT components spread across the country’s southern and central regions.

Samsung Electronics Chairman Lee Jae-yong has also stated that Gwangju is the next candidate for a semiconductor cluster, citing infrastructure advantages including power supply, water access, and workforce availability. 

The company also plans a high-bandwidth memory (HBM) fabrication facility in the Cheonan-Onyang corridor and a humanoid robot production line in Gumi.

SK Hynix is also heavily involved in the plan. As of May, SK Hynix’s market capitalization crossed $1 trillion on the back of AI data center demand. The company’s HBM chips power Nvidia’s AI accelerators and are sold to hyperscale cloud providers around the world.

For South Korean President Lee, the initiative is one of three “mega projects” covering semiconductors, physical AI, and AI data centers. “We must secure the core elements of AI faster than any other country,” he said during a televised address, adding that “semiconductors, physical AI, and AI data centers are the triple axis for a great leap forward.”

What are neighboring countries investing in for AI and related sectors?

Japan’s government has committed 10.5 trillion yen ($65.1 billion) to physical AI earlier this month, and this is part of a larger 370 trillion yen spending strategy that spans 17 sectors through fiscal 2040. 

The Nikkei 225 responded by closing above 72,000 for the first time, led by chip and robotics stocks.

Taiwan launched its National Center for AI Robotics in April with a $629 million funding program designed to create domestic robot startups between 2026 and 2029. The island already ranks among the top 10 economies by robot density, with 302 units per 10,000 employees.

China has been actively expanding its semiconductor output in the face of US export controls, and its AI labs now have combined valuations approaching $2 trillion.

South Korea’s exports rose 44% year-over-year to $21.4 billion, and that rise has been driven almost entirely by semiconductor demand tied to AI workloads.

Stakeholders want to decentralize the development beyond Seoul

A secondary goal of the plan is geographic diversification, with Lee stating that it is a way to reverse decades of industrial concentration in the Seoul metropolitan area. 

President Lee said, “We must break this long-standing cycle of discrimination and marginalization, not only for the sake of justice and equity, but also to ensure sustainable and inclusive growth.”

The government pledged to fast-track permitting, power, and water supply for the new facilities.

What is the state of the South Korean market and does it add pressure to this move?

The announcement comes days after a major selloff in Korean equities. On June 23, the KOSPI fell nearly 10%, with Samsung Electronics dropping 12.3% and SK Hynix declining 12.5% as foreign investors rotated out of crowded AI trades. The correction came after months of gains fueled by semiconductor demand.

South Korea’s stock market is heavily weighted toward chip stocks, and this means that the performance of the likes of Samsung, SK Hynix, and how they maintain their positions in the supply chain will have an extensive impact on the country.

US tech giants, including Google, Amazon, and Meta, have committed to spending $650 billion on AI infrastructure this year alone. That spending creates the demand South Korea is racing to supply, but it also attracts competition from every chip-producing nation in the region.

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