Samsung's reported consideration of Gwangju chip investment sparks debate over political influence

As the government pushes regional development initiatives, Samsung Electronics is considering establishing a semiconductor packaging plant in Gwangju. The reported discussions, however, have raised questions about whether political favors are swaying decisions about corporate investments.

Samsung Electronics has recently conducted an internal review of semiconductor investment plans for Gwangju, according to business sources on Wednesday.

Industry insiders believe that the company is more likely to build a semiconductor packaging facility rather than a front-end manufacturing plant, where wafer production and circuit fabrication take place. Packaging is the back-end process in which semiconductor chips are tested and assembled into finished products. With advanced semiconductors — including high bandwidth memory, or HBM — accounting for a growing share of the market, packaging capabilities have become increasingly important.

Politicians have long pushed for semiconductor-related investments in the Honam region, which includes Gwangju and North and South Jeolla.

Some have even argued that the Yongin semiconductor cluster should be relocated to the Saemangeum area in North Jeolla. Samsung Electronics, however, is said to be maintaining its strategy of concentrating front-end facilities in Yongin and Pyeongtaek — both in Gyeonggi — while considering building back-end ones in Honam.

Back-end facilities generally place less strain on local resources because they consume less electricity and water than front-end fabs and are less dependent on extensive industrial ecosystems.

Industry estimates put the cost of an advanced packaging plant at between 10 trillion won and 20 trillion won ($6.6 billion and $13 billion). By comparison, constructing a state-of-the-art front-end fabrication facility can cost between 60 trillion won and 70 trillion won.

If the Gwangju project moves forward, it would mark Samsung Electronics' first semiconductor production facility in Honam. The company currently operates semiconductor packaging plants in Onyang and Cheonan in South Chungcheong, as well as in Suzhou, China.

SK hynix is also reportedly reviewing regional investment options. However, the company recently began investing about 19 trillion won in an advanced packaging plant in Cheongju, North Chungcheong. As a result, any future investment plans would need to consider how new production bases can complement and share roles with existing ones.

According to analysts, the discussions are taking place against the backdrop of the government's regional development policy, which aims to reduce regional disparities and promote balanced national development.

“We will soon unveil a major investment project that will fundamentally reshape our growth strategy,” President Lee Jae Myung said during a news conference on Monday, marking the first anniversary of his inauguration.

“When it comes to the Yeongnam-Honam issue, I believe that we need to achieve greater balance by giving more consideration to Honam.”

Yeongnam, the southeastern part of the country, comprises Busan, Daegu, Ulsan and the Gyeongsang provinces.

Political figures have also publicly expressed expectations of attracting semiconductor investment.

Min Hyung-bae, the recently elected mayor of the integrated metropolitan government for Gwangju and South Jeolla, said at a forum that Prime Minister Kim Min-seok had told him, “Whatever it is, it's coming,” presumably alluding to an announcement related to semiconductors.

Business groups broadly agree on the need for regional development but argue that companies should retain autonomy over their investment decisions.

“Regional development is an important policy goal, but investment decisions should be made based on a comprehensive assessment of market potential, profitability, workforce availability and infrastructure,” said an insider from the business sector. “If the perception that political demands are influencing investment decisions spreads, it could increase the burden on companies.”

Industry observers believe that details of investment cooperation plans between the government and major corporations could be unveiled during a meeting between Lee and the heads of major business groups scheduled for later this month.

If the outlines of the investment projects emerge, the debate over how to balance regional development goals with corporate autonomy is expected to intensify.

Samsung Electronics and SK hynix declined to comment on whether they have held investment discussions with the government.

“There is nothing that we can confirm at this time,” the companies said. Regarding potential regional investment plans, they added, “No decisions have been made at this point.”

BY PARK YOUNG-WOO   [[email protected]]