south korea bets big on chips and ai: will it pay off?

2025-06-04 general

seoul, Wednesday, 4 June 2025.
president lee jae-myung is pushing hard to elevate south korea’s standing in ai and semiconductor industries. his ambitious plan includes a 100 trillion won investment and tax breaks for domestic chip production. experts remain skeptical, especially given that building a fab in south korea can cost 50% more than in japan. the president aims to create a “k-fabless valley” to rival nvidia. this initiative coincides with south korea’s may chip sales surging despite overall export declines, underscoring the sector’s strategic importance.

investment strategy and stock implications

President Lee’s administration aims to designate ai data centers as next-generation social overhead capital, potentially boosting investment in related infrastructure [1]. The proposed “semiconductor special law” includes a production tax credit of up to 10% for domestically produced and sold semiconductors [1]. This move is projected to benefit giants like samsung electronics and sk hynix, potentially leading to increased stock value due to enhanced profitability [4]. Legal experts, however, caution that these subsidies could trigger legal challenges and require careful alignment with international trade regulations [4].

the talent and labor challenge

Lee’s plan also addresses talent development, aiming to cultivate over 300,000 professionals by expanding specialized programs in universities and integrating semiconductor education into primary and secondary schools [5][6]. A contentious point is the 52-hour work week, with industry advocating for exemptions to maintain global competitiveness [3][7]. While the special law is being fast-tracked, disagreements persist regarding labor flexibility, potentially impacting r&d and production efficiency [3][7]. Some experts suggest focusing on other critical issues before revisiting the work-hour debate [7].

energy concerns and re100

Another key aspect of lee’s vision involves establishing re100 compliant semiconductor clusters to meet global environmental standards [5][6]. This includes constructing a ‘west sea energy highway’ to supply offshore wind power to industrial zones by 2030 [6]. However, industry insiders express skepticism about relying solely on renewable energy to meet the sector’s growing power demands [6][8]. Concerns arise that mandatory renewable energy usage, without adequate infrastructure, could increase operational costs and hinder competitiveness, potentially affecting investor sentiment [6][8].

generational divide and policy support

The recent election highlighted a generational divide, with younger men expressing conservative views due to economic anxieties [2]. This demographic shift could influence future policy support for lee’s initiatives, particularly if economic conditions do not improve [2]. The success of lee’s semiconductor and ai drive hinges on navigating these socio-political factors and securing broad-based support to ensure long-term stability and investor confidence [2].

Bronnen

semiconductor policy ai development