OTR: South Korea bets big on AI & Chips

South Korea has this week unveiled one of the largest industrial investment programmes in its history, committing close to US$880 billion (NZ$1.55 trillion) to building out the country’s semiconductor, artificial intelligence and robotics capabilities over the coming decade – a gamble that will ripple through global supply chains New Zealand businesses and consumers rely on, from smartphones to data centres.

South Korean President Lee Jae Myung announced the plan, dubbed the “Three Mega Projects for the Great Leap Forward,” alongside the leaders of Samsung Electronics and SK Hynix, the country’s two largest chipmakers and central players in the global memory chip market.

“We must secure the core elements of AI faster than any other country,” Lee said, dubbing semiconductors as “physical AI”, and AI data centres as the three pillars of the strategy.

At the heart of the package is roughly 800 trillion won – about NZ$912 billion – from Samsung, SK Hynix and their suppliers, funding four new fabrication plants and a chip-packaging cluster near Seoul, with completion targeted for the mid-2030s. A further 392 trillion won is earmarked for chipmaking, data centres and displays in Chungcheong province, and 270 trillion won for data centres and robotics in the southeast.

A major chunk of the investment is directed at a new chip cluster around the southwestern city of Gwangju, a historically under-developed, rural region. Speaking there, Lee said the project, worth roughly NZ$1.1 trillion, was about national survival as much as economic development.

The move to the regions is deliberate. For decades, South Korea’s industry has clustered around Seoul, driving up housing costs in the capital while rural areas lose population and investment. Lee says the new chip hubs as are a way to break that pattern, suggesting the plan is a matter of “justice and equity” as much as growth.

It’s a calculated bet, but not a blind one. The companies underwriting it – Samsung and SK Hynix – are the firms with the clearest view of real demand, since they make the high-bandwidth memory chips that AI data centres cannot get enough of. SK Hynix, the leading supplier of high-bandwidth memory to Nvidia, has told investors it expects demand to outstrip supply for at least the next three years. Micron, the US semiconductor company, has reportedly sold out its entire 2026 high-bandwidth memory output in advance.

That scarcity has already pushed up costs globally. Prices for “ordinary” memory, as used in phones and laptops, have increased more than 200 percent since early 2025 as manufacturers redirect capacity toward AI-grade chips. Apple and Microsoft both raised device prices last week, citing higher component costs. For New Zealand consumers and businesses buying everything from laptops to networking equipment, that price pressure is likely to be felt directly, given the country’s reliance on imported technology hardware.

The investment also signals a broader shift in who is funding the AI explosion. Much of the spending to date has come from US corporates like Google, Amazon and Meta, which have pledged a combined NZ$1.15 billion this year alone. Seoul’s move shows governments are increasingly treating computing and memory capacity as strategic national infrastructure, comparable to oil or steel in earlier decades.

Not everyone is convinced the rollout will be smooth. Kang-Kook Lee, a professor at Ritsumeikan University’s Graduate School of Economics, told Nikkei Asia that Samsung and SK Hynix were likely already planning capacity increases regardless, and that the investment would be “quite essential to their future success” – suggesting the government programme formalises, rather than creates, momentum already under way.

There are also practical hurdles. Securing enough water and electricity for new plants, and persuading engineers to relocate to less developed regions, will test the plan’s execution. Some Korean media have noted apparent gaps between government and corporate language – Samsung referring to the southwest as merely a “candidate site,” while SK Group spoke of a location “that meets requirements” – suggesting the Korean chaebols may be a little less committed than their government.

For New Zealand, which depends heavily on imported semiconductors and AI infrastructure, South Korea’s bet underscores how concentrated and strategically contested the technology supply chain has become, as the AI boom intensifies competition between regional rivals including Taiwan, China and Japan.

Asia Media Centre