Provincial gov'ts court Samsung, SK hynix chip plants, but experts question feasibility 

Local governments in Korea's southern regions are racing to attract semiconductor plants from Samsung Electronics and SK hynix, emboldened by the government's drive to pull the chip industry out of the greater Seoul area.

For the companies, however, the choice is thornier, hinging on cost, infrastructure and a corps of engineers who have little desire to leave the capital behind.

The government's vision to build a so-called southern semiconductor innovation belt has set off a scramble among provincial authorities to attract Samsung and SK hynix factories. Under the southern belt plan unveiled by the Ministry of Trade, Industry and Resources, the government is weighing how to steer the chip industry — currently concentrated in the greater Seoul area, including Gyeonggi —southward.

The Jeolla region has emerged as a front-runner in this government initiative, with the Gwangju Science Valley 3 — an R&D-focused industrial cluster — and the Saemangeum National Industrial Complex as possible sites. 

"Expanding investment in the Jeolla and Chungcheong regions is a sign that a semiconductor industry built around the capital is spreading into the provinces, and a step toward completing the national supply chain," said Lee Cheol-woo, the governor of North Gyeongsang.

"Because attracting a chip plant will shape the region's future competitiveness, we will pour all our administrative resources into it," said Min Hyung-bae, mayor-elect of the new special city that merges Gwangju and South Jeolla on July 1.

On the other hand, the companies are more guarded, maintaining the line that nothing has been decided regarding building chip production bases in the Jeolla region. Details of the regional investment plans are expected to emerge late this month, at a meeting of major conglomerate chiefs chaired by President Lee Jae Myung.

Moving production poses problems because semiconductor manufacturing reaps its greatest efficiency from concentration. "Front-end" fabrication plants, in particular, depend on a tight ecosystem of materials, parts and equipment suppliers, and artificially severing that from the existing capital-region supply chain would drive up logistics costs and drag down efficiency. For that reason, many expect Samsung and SK hynix to build "back-end" packaging plants in the Jeolla region rather than front-end fabs.

Chipmaking splits into a front-end process, which etches circuits onto wafers, and a back-end process, which assembles the chips into finished products such as high-bandwidth memory (HBM). Packaging, the assembly of multiple chips to lift performance and power efficiency, is a high-value step whose importance has grown as the AI boom sends HBM demand soaring.

The catch is that front-end and back-end work also gain from being close together. Wafers and packaging equipment are so sensitive to the slightest vibration or temperature shift that they have to move through climate-controlled, vibration-free networks that keep shock, heat, humidity and static in check.

"A traffic accident near Onyang in South Chungcheong last month destroyed 18 billion won ($12 million) worth of semi-finished chips that had finished front-end processing," a semiconductor industry official said. "With transport vehicles making hundreds of trips a day between front-end and back-end sites, a back-end plant farther away could raise the risk of accidents like this."

Shipping finished products is no simpler. Chips are light but expensive, and 99 percent of the country's exports now move as air cargo through Incheon International Airport. A packaging plant in the Jeolla region would need a dedicated expressway and rail network linking it to Muan Airport, which, in turn, would require regular cargo flights and a specialized logistics system suited to the products.

Securing skilled workers to run advanced packaging is another hurdle. Talent is so heavily concentrated near the capital that the industry refers to the Gyeonggi cities of Yongin and Pyeongtaek as the "southern limit" for recruiting.

"Forcing core engineers who have already built their lives in the capital region to move is simply unrealistic," an industry official said. "Among staff, the common reaction is, 'If you tell me to go to the provinces, I'd rather change jobs.'"

Nor can the provinces simply train workers and put them to work right away. The industry reckons it takes at least five years to educate and train new hires to the point where they can work on-site.

"Since the arrival of HBM has sharply raised the difficulty of packaging, the related materials, parts and equipment firms need to move in together to create the benefits of clustering," said Lee Jong-hwan, a professor of system semiconductor engineering at Sangmyung University. "To do that, contract-based semiconductor departments tied to leading regional universities should be expanded sharply, building a virtuous cycle of cultivating local talent who can put down roots for the long term."

Some argue that building a local packaging ecosystem is itself the way to draw talent. Amkor Technology Korea, a chip packaging company, is reviewing a phased 1 trillion won ($660 million) expansion of its Gwangju plant through 2035. The government and the Gwangju city government are pushing to build an advanced packaging demonstration center, and the Gwangju Institute of Science and Technology has unveiled a plan to train 1,400 chip-design workers over five years.

"For the government's southern semiconductor innovation belt to grow into a meaningful industrial complex like the Yongin cluster, it has to provide backing such as securing talent by building a local ecosystem," said Kim Yong-seok, a chair professor at Gachon University's College of Semiconductors. "Above all, companies, as the final decision-makers, must be left to weigh and decide all of this themselves."

Lee Chan-hee, chairman of the Samsung Compliance Committee, weighed in on the government's plan on Tuesday, before the committee's regular meeting at the Samsung Life Insurance building in Seocho District, southern Seoul.

"If it actually goes ahead, I expect it will become a matter for the committee to discuss," he told reporters, referring to the prospect of a chip plant in the Jeolla region. "We will watch closely so that it is not swayed by political logic, without weighing the company's sustainability and the impact on the national economy."

BY KIM KYUNG-MI, KIM SU-MIN [[email protected]]