Massive chip complex gets green light

The SK Hynix proposal to develop a massive chip-making complex just 40 kilometers (25 miles) south of Seoul has been green-lighted by the government despite intense competition from regions farther from the capital and the administration’s stated desire to promote growth more evenly around the country.

The Ministry of Trade, Industry and Energy said Friday that it accepted the chipmaker’s plan to build the 120 trillion won ($107 billion) complex at Yongin, Gyeonggi. Final approval is needed from the Ministry of Land, Infrastructure and Transport. The plan must receive an exemption from regulations that limit industrial development close to Seoul.

The world’s No. 2 chipmaker requested approval from the government Thursday for the 4.48 million-square-meter (1,107-acre) complex, which will house four plants for DRAM and next-generation chip fabrication and host over 50 parts suppliers.

Late last year, the government announced it would work with industry to develop a semiconductor complex to maintain the country’s global dominance in the industry. The ministry emphasized the importance of the complex Friday as competition in the chip business becomes more intense.

“In terms of global competitiveness, latecomers such as China and companies such as Intel, through new technology, are on a fierce pursuit,” said Kang Kyung-sung, the ministry’s director general for the materials and components industries. “Through cooperation between the private sector and the government, the [plan] includes a strategy to maintain an unrivaled position.”

Semiconductors are vitally important for Korea. They account for 16 percent of total exports, the largest category, while the two main companies, Samsung Electronics and SK Hynix, have more than 73 percent of the global DRAM market in terms of revenue.

The ministry’s decision is expected to draw criticism from local governments hoping the government’s preference for more balanced growth would result in a region more distant from Seoul being chosen. They have been in fierce competition to host the $100 billion-plus project, which is expected to directly create 17,000 jobs.

After SK Hynix’s announcement Thursday, the city council of Cheonan in South Chungcheong, one of the candidates for the project, said building the complex in Yongin would impede development.

The Industry Ministry explained that it accepted the chipmaker’s proposal for Yongin as the city’s proximity to the capital and to other existing semiconductor facilities will attract more talent and foster cooperation between companies. The government vowed to quickly implement the plan.

“When a company makes such a large investment, it is sensible to quickly eliminate uncertainties surrounding it,” explained Kang. “Latecomers are catching up, and there’s a need to resolve regional conflict so [we] will do our best so that it passes the [Land Ministry] review as soon as possible.”

If approved, construction will begin as early as 2022 with chip manufacturing starting in 2024. Full production capacity is expected to be 800,000 units per month, according to the Industry Ministry.

The government expressed hope that the new complex will serve as a cornerstone to create a Korean version of Silicon Valley in Gyeonggi.

BY CHAE YUN-HWAN [chae.yunhwan@joongang.co.kr]