It's time for the Lee Jae Myung administration to break with the past

Lee Sang-ryeol

The author is a senior editorial writer at the JoongAng Ilbo. 

A report published this week by Japan's Nikkei warned that Korea's growing dominance in memory semiconductors could eventually trigger trade friction with the United States. The prediction should not be dismissed as mere speculation. Japan has already lived through a similar experience.

Once commanding about 80 percent of the global semiconductor market, Japan saw its industry weakened after the 1986 U.S.-Japan Semiconductor Agreement. Under pressure from Washington to disclose production costs and curb low-priced exports in order to preserve U.S. competitiveness, Japanese firms gradually lost their edge. That decline created an opening for Korea and Taiwan to emerge as global semiconductor leaders.

There are signs that history could begin repeating itself. Samsung Electronics posted more than 89 trillion won ($57.2 billion) in operating profit during the second quarter, reclaiming the top position in the global semiconductor industry. Industry observers estimate that Samsung's semiconductor earnings this year alone will exceed the company's cumulative profits from the business over the previous four decades. Together, Samsung Electronics and SK hynix now account for roughly 60 percent of the global memory chip market.

Korea celebrates the worldwide shortage of AI chips as an unexpected windfall created by the artificial intelligence boom. For America's technology giants, however, the situation is far less welcome. Higher chip prices squeeze profit margins and add inflationary pressure to the broader U.S. economy. Apple has reportedly lobbied Washington to permit purchases of memory chips from China's Yangtze Memory Technologies. After describing soaring semiconductor prices as a "once-in-a-century flood," Chief Executive Officer Tim Cook ultimately raised prices for MacBooks and iPads.

Against this backdrop, the Lee Jae Myung administration has unveiled its plan to build four semiconductor fabrication plants in the Honam region, hoping to capitalize on the AI-driven surge in demand. Yet the competitors are not domestic rivals but the United States, China and Japan. Rather than turning the project into a government-led national campaign, it would be more practical for the government to concentrate on providing strong support while allowing companies to lead.

Time is the decisive factor. The fabs must be completed before the AI investment cycle loses momentum and while Korea still enjoys a commanding position in the market. Building advanced semiconductor facilities requires four essential elements: people, water, electricity and land. By selecting the site of the former Gwangju military airport for the Honam semiconductor cluster, the government has addressed only one of those requirements — land. Ironically, that is the easiest part of the challenge.

The government must now explain how it intends to secure the remaining essentials: electricity, industrial water and skilled workers. Estimates suggest the Honam semiconductor complex alone will require power equivalent to four large nuclear reactors, each with a capacity of 1.4 gigawatts. No other energy source can realistically provide that scale of reliable electricity. The same applies to industrial water. Expanding supply will inevitably require the government to move beyond its longstanding opposition to dams and large-scale water projects. Attractive living conditions, including quality schools and medical services, will also be needed to draw skilled workers. At the same time, labor market regulations should be eased. It makes little sense to accelerate factory construction while maintaining policies such as the 52-hour workweek and the so-called Yellow Envelope act.

In fact, opposition to nuclear power and dams has not always defined the Democratic Party. Nuclear energy expanded under both the administrations of President Kim Dae-jung and President Roh Moo-hyun. Major dams were also built during those years, while labor policy was less union-oriented than it is today.

President Lee has pledged to support businesses by every available means. If that commitment is genuine, the administration must break with the populist policies that departed from scientific and practical considerations, including opposition to nuclear power, resistance to dam construction and an excessive tilt toward organized labor. Those changes are essential if the Honam semiconductor project is to succeed.

"War" is an apt description of today's global semiconductor competition. The administration has chosen the Honam project as its strategic weapon. If the project ultimately leads to expanded nuclear power, improved water infrastructure and meaningful labor market reform, it could become more than a regional development plan. It could mark the beginning of a new era for Korea's economy.