Chip supercycle breathes fiscal life into SK hynix's hometown

SK hynix's record profits last year didn't just reward shareholders — they also transformed the finances of the city the chipmaker calls home.

Icheon, a mid-sized city in Gyeonggi that hosts the chipmaker's global headquarters and primary memory manufacturing hub, has, for the first time, surpassed a fiscal self-reliance ratio of 50 percent, meaning more than half of its budget is now funded by its own revenues rather than central government transfers.

This year's ratio stands at 55.13 percent, up from 34.56 percent in 2024 and 44.58 percent in 2022. Neighboring Yeoju and Gwangju cities, by comparison, stand at 20.21 percent and 31.12 percent, respectively.

The shift is almost entirely down to SK hynix. The company posted record revenue of 97.1 trillion won ($63.7 billion) and an operating profit of 47.2 trillion won last year. The local corporate income tax paid to Icheon accounted for more than 60 percent of the city's total revenue. Flush with chip money, Icheon reportedly expanded its budget to 1.7 trillion won after a supplementary budget revision, up from an initial 1.2 trillion won.

In April, the city honored the company by designating a roughly two-kilometer (1.2-mile) stretch of road in front of SK hynix's facilities as "SK hynix Road" and installing four street signs along the route in recognition of its contributions to the local economy and job creation.

City officials say, however, they are being careful not to let the windfall go to their heads. "SK hynix's local corporate income tax accounts for more than 60 percent of our total revenue," an Icheon city official said. "In 2024, when the company's performance was poor, the tax payment was zero — so rather than sharply increasing spending, we are building up a fiscal stabilization fund to prepare for years when revenue falls."

Municipalities in southern Gyeonggi that host Samsung Electronics facilities are also benefiting. Yongin, Hwaseong and Pyeongtaek — home to Samsung's Device Solutions division campuses — had been bracing for a significant revenue hit after a general strike loomed over the chipmaker's operations last month. Industry estimates had suggested a full production shutdown could cause direct losses of 20 trillion to 30 trillion won at Samsung alone, and up to 100 trillion won across the broader industry, with local governments facing projected tax revenue declines of 20 to 30 percent.

The strike was resolved through government mediation, allowing production lines to resume normally. Pyeongtaek now expects semiconductor-related tax revenue to rise from around 50 billion won to around 150 billion won. Hwaseong expects an increase of around 100 billion won. In Yongin, Samsung's local corporate income tax payment has already risen 2.8 times, from 22.9 billion won last year to 63.5 billion won this year.

"We had expected our local corporate income tax — which tracks Samsung's operating profit — to fall sharply if a strike had gone ahead," a Yongin city official said. "We are relieved that an agreement was reached and that our rail, education, and public infrastructure projects can now proceed without disruption."

Analysts say the municipalities should use the windfall wisely. "Having fiscal room is a happy problem to have, but the focus should be on capital expenditure that builds future growth potential rather than distributing money through consumption-based spending," said Lee Sang-min, a senior researcher at the Fiscal Reform Institute. "There is a need to invest in energy infrastructure aligned with the AI transformation and the transition to carbon-free energy."

BY SON SUNG-BAE   [[email protected]]