South Korea is making a major push to capitalise on the global artificial intelligence boom, announcing large-scale investments in semiconductor manufacturing and AI data centres as it seeks to strengthen its position in the highly competitive global chip industry.
The investment drive, led by South Korean chipmakers, comes amid soaring demand for advanced semiconductors used to power AI systems. Analysts say the surge presents Seoul with a rare opportunity to reinforce its technological leadership while competing with rivals such as China.
The global market for advanced memory chips is dominated by three companies: US-based Micron and South Korea’s Samsung Electronics and SK hynix. As governments and technology firms invest hundreds of billions of dollars in AI development, these companies have recorded substantial increases in profits and share prices.
“AI has not only provided big demand, it has also created shortages, and that has driven price escalation,” Jim Handy, semiconductor expert at Objective Analysis, told AFP.
Rising memory and storage chip prices have also increased costs for consumers, with Apple raising the prices of MacBooks and iPads earlier this month.
The AI-driven boom has also fuelled labour negotiations within the industry. Samsung recently avoided a major strike after reaching a bonus agreement with its largest labour union.
South Korea has pledged to triple its AI-related spending this year, aiming to establish itself alongside the United States and China as one of the world’s leading AI powers.
According to Lian Jye Su, chief analyst at Omdia, the current AI expansion offers South Korea a “one-time opportunity” to narrow the competitive gap with China.
“It’s the perfect time” for South Korea to leverage its strategic advantage and make investments as “the AI boom might die down” and demand could regress, he told AFP.
The Financial Times reported that Apple is exploring purchases of memory chips from Chinese manufacturer CXMT, a move that could benefit Chinese suppliers as well as Taiwanese competitors amid global shortages. Apple and CXMT have not commented on the report.
Despite China’s lower labour costs and strong domestic market, Su believes international concerns about overdependence on Chinese semiconductor production could continue to favour South Korean manufacturers.
“People are less keen to… (become) overly reliant” on Chinese silicon, a factor that Korean vendors like Samsung now want to “double down on”.
Analysts also say established Asian chipmakers remain competitive because they continue investing heavily in innovation.
“This gives them profitability that helps to produce a moat between them and smaller firms” who cannot maintain the same level of spending and research investment, Handy said.
With the latest investment announcements, South Korean companies are also seeking to diversify beyond memory chips while using their strong financial position to expand into other semiconductor technologies.
Su said diversification would help prevent excessive dependence on a single high-growth sector, reducing the risk of what economists describe as “Dutch disease”—where rapid growth in one industry weakens broader economic development.
The rapid expansion of the AI sector has also prompted questions about whether current market valuations are sustainable. Over the past year, Samsung’s share price has climbed more than 430 per cent, while SK hynix has surged approximately 770 per cent.
Despite concerns about a potential market bubble, some analysts remain optimistic that demand for AI technologies will continue to grow as artificial intelligence becomes increasingly integrated into businesses worldwide.
For memory chips, “there’s little to stop price rises until they impact end markets,” Handy said.
“If prices rise too high then markets move to another technology or disappear altogether,” he explained.
“We’re not there yet.”
