Honam semiconductor project must not remain a paper fab

Chung Hyo-shik

The author is the social news editor at the JoongAng Ilbo. 

“If we fail, let's all jump into Yeongil Bay together.”

That was how Park Tae-joon, then president of Pohang Iron and Steel Co. — now Posco — encouraged employees in 1968 as they began building Korea's first integrated steel mill on the barren coast of Pohang. Park, who later served as prime minister, recalled the episode in his 2004 JoongAng Ilbo memoir series, "Stories I Want to Leave Behind".

From groundbreaking to the completion of the first production facilities in 1973, the project consumed 120.4 billion won at the time, approximately $1.5 billion in today's currency, which included $119.48 million from Japan's reparations-related settlement funds. That was roughly three times the cost of constructing the Gyeongbu Expressway. More than 2 trillion won was reportedly invested over the following decade to expand the steelworks through its second, third and fourth phases.

Pohang Steel became the starting point for Korea's transformation into a heavy and chemical industrial economy under the Park Chung Hee administration.

In 1973, the government launched its Heavy and Chemical Industry Promotion Plan, investing 4.2 trillion won at the time over eight years in six strategic industries: steel, shipbuilding, machinery, chemicals, nonferrous metals and electronics. Industrial complexes subsequently emerged in Ulsan and Yeosu for petrochemicals, Gumi for electronics, Changwon for machinery and Geoje for shipbuilding. Except for Yeosu, all were in Korea's southeastern Yeongnam region. Adjusted for inflation, the investment would equal about 60 trillion won today. When Korea's economic growth is taken into account, that figure rises to about 240 trillion won.

The "three mega projects for Korea's great leap forward," unveiled on June 29 by President Lee Jae Myung alongside Samsung Electronics Chairman Lee Jae-yong and SK Group Chairman Chey Tae-won, dwarf that earlier initiative. The combined investment plan totals 4.76 quadrillion won, including 2.66 quadrillion won from Samsung Electronics and 2.1 quadrillion won from SK Group, covering semiconductors, physical AI and AI data centers.

Some of the investment is already underway, including Samsung Electronics' semiconductor clusters in Pyeongtaek and Yongin and SK hynix's Yongin cluster. The most notable new initiative is the Honam semiconductor project, under which Samsung Electronics and SK hynix will invest 800 trillion won to build two memory chip fabrication plants, both in Gwangju. The companies also plan to invest tens of trillions of won in AI data centers, including facilities at the Solarido solar power complex in Haenam.

The Ministry of Trade, Industry and Energy says Korea's semiconductor industry has reached the limits of growth because of its concentration in the Seoul metropolitan area. It argues that Honam should become both the country's second semiconductor production base and the center of a Korean-style AI industrial revolution. The government also plans an 81 trillion won high bandwidth memory packaging complex in the Chungcheong region while developing Busan, Gumi and the southeastern region as innovation hubs for semiconductor materials, parts and equipment.

The day after the announcement, Lee traveled to Gwangju to emphasize the project's historical and political significance.

"Since the founding of the Republic of Korea, resources and opportunities have been concentrated in the Seoul metropolitan area and the Yeongnam region, laying the foundation for industrialization but also creating enormous regional disparities," he said, using the country's official name. He added that the semiconductor project should help compensate for Honam's long history of exclusion and serve as the first step toward balanced national development. Calling it "a historical and national reward" for a region that endured discrimination while defending democracy, he pledged to ensure its success.

The problem is that the project's essential details remain undecided. The exact locations of the fabrication plants and the investment timetable have yet to be determined.

Unlike previous state-led initiatives such as Sejong City under the Roh Moo-hyun administration or the Four Major Rivers project under the Lee Myung-bak administration, the three mega projects are intended to be led by private companies. Yet the announcement appears to have preceded the necessary preparation.

Industry experts already warn that securing the stable electricity and water supplies required for semiconductor fabrication plants could take years. Economic feasibility and environmental reviews also remain unfinished.

Meanwhile, the ruling party's most pressing political event is its Aug. 17 national convention, overshadowed by an anachronistic dispute over ideological legitimacy. Domestic party politics should not become the variable that determines the future of Korea's most ambitious industrial strategy.