Samsung to build £189.6bn semiconductor ‘mega cluster’

The South Korea-based chipmaker expects to invest 300 trillion won (£189bn) over the next 20 years to build five chipmaking plants near Seoul. 

The semiconductor "mega cluster", as the company has called it, would open in 2042.

The project was been framed within South Korea's ambitions to become one of the leading suppliers of silicon ships. The cluster aims to attract 150 other companies producing materials and components or designing high-tech chips, according to South Korea’s ministry of trade, industry and energy.

The cluster is destined for Yongin, south of Seoul in Gyeonggi Province, where both SK hynix and Samsung have a presence.

According to President Seok-Yeol Yoon, it would be the "world's largest" chipmaking facility. 

"The mega cluster will be the key base of our semiconductor ecosystem," South Korea's ministry of trade, industry and energy said in a statement. 

In addition to chipmaking, the cluster is also expected to host companies engaged in the manufacturing of displays, batteries, biopharmaceuticals, electric vehicles and robots.

“[South Korea] has world-class manufacturing capabilities and technologies in various high-tech industries such as semiconductors, secondary batteries and displays, but [government] support and regulatory conditions have been insufficient,” the trade ministry said. 

Under the official plan, companies in high-tech industries will be offered incentives like expanded tax breaks and infrastructure support. The government said it hopes to draw 550 trillion won (£346bn) in corporate investment on the project through until 2026.

Samsung is the world's biggest maker of memory chips, smartphones and TVs.

However, over the past few months, the company has seen its profits fall by nearly 70 per cent, as Russia's invasion of Ukraine and high inflation rates have significantly slowed demand for consumer electronics products and memory chips.

Since 2020, the global economy has been facing a shortage of silicon chips. The economic losses caused by the lack of semiconductors can be measured in billions of dollars.

Last August, the US passed a groundbreaking ‘Chips and Science’ law, which will provide $39bn (£32.3bn) in funding for domestic semiconductor chips manufacturing and research, as part of the Biden administration’s efforts to make the US more competitive with China. 

The US has also been imposing strict restriction on exports of semiconductor technology to China, citing national security concerns. 

South Korea's trade ministry said the US's Chips Act "could deepen business uncertainties, violate companies' management and technology rights as well as make the United States less attractive as an investment option".

Over the past three years, the chip shortage has forced Ford, Jaguar Land Rover, Volkswagen, General Motors, Nissan, Daimler, BMW, Renault and Toyota to shut factories, scale back production or exclude high-end features such as integrated satellite navigation systems, which rely on sophisticated semiconductor technology.

Last year, Raimondo warned that the global semiconductor crisis is expected to last through 2023 and perhaps longer.