South Korea launches $3.5 billion chip fund to secure supply chain

South Korea will launch a 5 trillion won ($3.52 billion) fund for chip materials, components, equipment and fabless firms, part of a 10 trillion won package to close supply-chain gaps.

"The government will also provide 5 trillion won in trade finance for export-oriented suppliers," Presidential Chief of Staff Kang Hoon-sik said Monday, adding that a Mega Special Zone Act would be pushed through parliament this year to accelerate permits, environmental reviews and infrastructure development.

The fund targets the weak links in a memory-chip powerhouse. Samsung Electronics and SK Hynix, the world's two largest memory makers, have jointly committed 800 trillion won ($564.9 billion) to the Honam region centered on Gwangju — part of a 576 trillion won "super project" spanning semiconductor production, AI and regional data centers. More than 350 trillion won of projects are slated to break ground this year, with 57 trillion won in R&D.

The government will secure 650,000 tonnes of daily water supply by 2030 for Honam projects and 14.7 gigawatts of power for the Yongin cluster by 2041, removing infrastructure constraints that have slowed fab expansion. Lee has ordered the temporary relocation of Gwangju's military airport by mid-2028 to free land, benchmarking TSMC's Kumamoto plant, which was completed in just 22 months.

The Kumamoto benchmark

Lee demanded a "blitzkrieg" approach, pointing to TSMC's Kumamoto fab in Japan, which went from groundbreaking to completion in 22 months versus the typical three to five years for a semiconductor plant. The Gwangju base is one of five "Co-Operating Bases" where US Air Force units can deploy in a contingency, complicating the land handover. Lee ordered that construction begin on nearby land even before the relocation is complete.

South Korea's reliance on imported materials and equipment has long been the weak spot in an otherwise dominant memory franchise. The new fund is designed to nurture domestic suppliers across design, testing and mass production, with a separate 1 trillion won, 10-year cooperation program linking large companies with smaller vendors. The regional push extends beyond Honam: the government plans advanced packaging in the Chungcheong region, physical AI industries in the Gyeongsang region, and large-scale AI data centers outside the capital area — a deliberate effort to spread the advanced-industry map beyond Seoul and counter what Lee called the polarization of "K-shaped growth."

Investor stakes

The push comes as the KOSPI has plunged 40 percent from its peak of 9,385 points, triggering margin calls that wiped out an estimated 350,000 to 460,000 retail accounts, 62 percent of them aged 20 to 30. Lee's approval rating has fallen to a record low of 43.3 percent. For investors, the fund shows sustained government backing for Samsung Electronics and SK Hynix, which trade at a premium to global peers on AI-driven memory demand, while suppliers of materials and equipment stand to gain from the 10 trillion won in direct support. SK Hynix commands the higher multiple on its high-bandwidth memory (HBM) leadership — the AI-era chips that only three companies globally can mass-produce, two of them South Korean.

This article is for informational purposes only and does not constitute investment advice.