Korean Semiconductor Giants Consider New Production Bases in Honam Region

Samsung Electronics and SK Hynix are considering establishing semiconductor production bases in the Honam region, signaling a potential shift in South Korea's semiconductor industry landscape. This initiative aims to distribute semiconductor investments and infrastructure, which have been concentrated in the Seoul metropolitan area, to promote balanced national development and enhance industrial competitiveness.

According to industry sources on June 17, both companies are evaluating locations for semiconductor factories in Honam. Samsung is looking at Gwangju and Saemangeum in North Jeolla Province, while SK Hynix is considering Gwangju and Muan in South Jeolla Province for advanced semiconductor packaging facilities. This would mark the first time Samsung has established semiconductor production facilities in the Honam region, and SK Hynix is reportedly exploring new investments to expand beyond its current bases in the metropolitan and Chungcheong regions.

Historically, the benefits of South Korea's semiconductor industry growth have been concentrated in the Seoul area, with significant investments centered around Samsung's Pyeongtaek campus, the Yongin semiconductor cluster, and SK Hynix's Icheon campus. While the semiconductor sector has become a cornerstone of the national economy, concerns have been raised about the widening industrial gap between regions.

In this context, investments in the Honam region are seen as a meaningful attempt at promoting balanced national development. The recent surge in demand for AI semiconductors has heightened the need for expanded production facilities, while the power and water supply capabilities in the Seoul area are nearing their limits, further supporting the rationale for regional distribution.

For instance, the power self-sufficiency rate in Gyeonggi Province is below 60%, whereas Jeonnam is recognized as the largest renewable energy production area in the country. With concentrated solar and offshore wind power facilities, Jeonnam is well-positioned for future RE100 (100% renewable energy) compliance and power security.

There is also significant optimism regarding the development of the regional industrial ecosystem. Gwangju is already home to semiconductor post-processing company Amkor Technology, and the Honam region is accelerating the establishment of industrial complexes and energy infrastructure to attract advanced industries. If Samsung and SK Hynix's investments materialize, it could lead to further investments from equipment and materials suppliers, positioning Honam as a new pillar of South Korea's semiconductor industry.

However, prevailing views suggest that this investment will not replace the existing semiconductor cluster in the Seoul area. The factories under consideration by both companies will focus on post-processing packaging rather than the front-end processes that involve etching advanced circuits onto wafers.

Front-end processes require close integration with research and development organizations, production lines, and equipment manufacturers, making it challenging to move away from the Seoul cluster. In contrast, packaging processes have fewer location constraints and lower power demands, allowing for regional distribution. In fact, major semiconductor powerhouses like the United States and Taiwan concentrate core research and development and front-end processes in specific clusters while adopting regional distribution strategies for post-processing production facilities.

An industry insider noted, "While advanced packaging is becoming increasingly important, the burdens associated with regional distribution are relatively smaller compared to front-end processes. For companies, this presents a realistic option to maintain competitiveness while expanding regional investments."