"Honam Because of Abundant Electricity?"... The Hidden Core of the "800 Trillion Won Semiconductor Bet"

800 trillion won (approximately $518 billion). This is the amount Samsung Electronics and SK Hynix plan to invest in the Honam region. While President Lee Jae-myung emphasized that the decision was "based on economic principles," the opposition party is pressuring the government to disclose the site selection criteria, calling it "political compensation." Representative Ahn Cheol-soo of the ruling People Power Party demanded that the land holdings of ruling party officials be revealed first, claiming the project "will create countless wealthy landowners."

Foreign media outlets are calling the project a "massive bet in the AI era" while questioning its success. Meanwhile, data from international organizations show that substations in the Honam region have been designated as grid-constrained areas, restricting connections for new power generation facilities until 2032. How should we view this? Here is a summary of the situation in eight points.

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1. "Is the 800 Trillion Won Investment Really a Realistic Figure?"

Let's examine this figure first. Samsung Electronics and SK Hynix plan to invest 800 trillion won, or about $518 billion, in the southwestern region. This is the largest private investment in South Korean history. However, Reuters added, "If the AI boom cools, it could lead to a painful adjustment of overcapacity." An analyst at Morningstar, a U.S. financial research firm, warned that "accelerating long-term investment could increase the risk of oversupply in the memory market." Professor Lee Jong-ho of Seoul National University also pointed out, "As this is an investment that will determine the company's future, it may have been pushed forward too quickly."

2. "Why Is Semiconductor Expansion Needed Now?"

We need to look at the background. According to the Semiconductor Industry Association (SIA), global semiconductor sales in 2025 surged 25.6% year-on-year to $791.7 billion, and are estimated to reach $1.5 trillion in the June 2026 forecast. In particular, demand for High Bandwidth Memory (HBM), which is essential for AI accelerators, is exploding. Samsung and SK hold key positions in this field. Reuters analyzed that "South Korea has emerged as a major beneficiary of the surge in AI investment," adding, "There is strong pressure that if they do not increase production capacity now, they will miss the opportunity." In other words, this project did not appear out of nowhere; it is an extension of the global AI supply chain competition.

3. "Is Honam Really the Optimal Location for Semiconductors?"

This is the most hotly debated question. Presidential Chief of Staff Kang Hoon-sik highlighted the advantages, stating, "The Jeonnam-Gwangju Unified Special City is a large flat area rich in renewable energy and adjacent to KTX stations and Muan International Airport," and noted its ability to "secure outstanding talent from Chonnam National University, GIST, and KENTECH." President Lee Jae-myung also emphasized, "The Gwangju-Jeonnam region has become the only area capable of resolving these issues, including water, power, land, and infrastructure."

However, there is a twist. According to a South Korean power report by SEMI, an international semiconductor industry association, about 10 GW of renewable energy facilities were operating in the Honam region as of August 2024, and this could increase to 42 GW by the end of 2031. On the surface, the government's logic of the "southwestern region having high accessibility to renewable energy" seems correct. However, the same report states, "All substations in Honam have been designated as grid-constrained areas, and the timing for when new power generation facilities can connect has effectively been pushed back to 2032."

Semiconductor fabrication (fab) is a representative 'energy-intensive industry' that requires a massive, uninterrupted 24-hour power supply. While saying "electricity is abundant" may be true in terms of power generation potential, whether a semiconductor factory can stably receive and use it when needed is a separate issue of transmission grids and grid capacity.

4. "How Much Water and Electricity Do Semiconductor Fabs Consume?"

Let's look at the numbers. According to the environmental impact assessment for TSMC Arizona under the CHIPS Program by the U.S. National Institute of Standards and Technology (NIST), if all three phases are fully operational, they will require a total of 17.29 million gallons of water and 8.54 GWh of electricity per day. Intel's Ocotillo project also uses about 6.8 million gallons of water and 5.8 GWh of electricity daily. Looking at this scale, it is clear that water, power, wastewater treatment, and grid reinforcement are far more essential to evaluating semiconductor locations than political rhetoric.

The NIST environmental assessment specifies that producing 1,000 gallons of ultrapure water requires approximately 1,400 to 1,600 gallons of municipal water. In other words, water supply should not be judged merely by the volume of intake, but must include purification, reuse, and wastewater recovery systems. This is why simply stating "Honam has vast land" is insufficient to justify it as a semiconductor site.

5. "Is the Claim of 'Creating Wealthy Landowners' Groundless Demagoguery?"

Let's examine Representative Ahn Cheol-soo's claim. Ahn demanded, "The Honam semiconductor factory will create countless wealthy landowners," adding, "The land holdings in Honam of this administration's public officials and Democratic Party members must be disclosed first." This point needs to be analyzed in two parts.

First, there are currently no proven facts regarding whether specific politicians or ruling party officials actually own land near the candidate sites in the southwestern region, or if they purchased it using insider information. Therefore, we must not assume the claim is true. At the same time, however, the general proposition that large-scale public infrastructure and industrial complex designations lead to rising land prices and private rent generation is widely recognized by international organizations and academia. The Organisation for Economic Co-operation and Development (OECD) explains that government infrastructure investment, zoning changes, and public service provision trigger land price increases, and if those gains are not recaptured, "landowners obtain unearned windfall gains." To mitigate this, the OECD discusses "Land Value Capture" mechanisms.

As such, large-scale national industrial complex developments inevitably bring upward pressure on surrounding land prices, requiring strict control of internal information and anti-speculation measures. In other words, the mechanism of "semiconductor factory announcement → surge in surrounding land prices → massive profits for some" is structurally highly plausible. While Representative Ahn Cheol-soo's phrasing may be exaggerated, the underlying economic structure of the issue is very real.

6. "Is the Demand to Disclose Site Selection Criteria Valid?"

Let's look at the demand made by Representative Song Eon-seog of the People Power Party. Song said, "The site selection criteria and evaluation results for each region must be transparently disclosed to the public first." This demand is highly valid from a policy governance perspective. The OECD's report on transparency in investment incentives notes that governments can provide non-tax incentives for strategic projects, such as infrastructure and land provision, electricity rate discounts, administrative support, and assistance in land acquisition. The problem is that if such support is non-transparent, it increases discretionary behavior, corruption, and controversies over preferential treatment.

The OECD presents three principles of transparency: Availability, Accessibility, and Clarity, emphasizing that "enhancing transparency is necessary not only for investment promotion but also for policy evaluation and good governance." In particular, the OECD states that a lack of transparency makes it difficult to reduce discretionary behavior and even the potential for corruption. Conversely, "making requirements and procedures specific and public increases government accountability." Therefore, the demand to "disclose site selection criteria and regional evaluation results" is a highly standard request under international organization guidelines, regardless of partisan attacks.

7. "Why Is the Yongin Semiconductor Cluster Still Not Ready?"

We need to look at a point of comparison. A project is underway in Yongin, Gyeonggi Province, where Samsung Electronics and SK Hynix plan to build 10 fabs. SK announced its plan in February 2019, and Samsung in March 2023. However, even SK, which started earlier, only broke ground for fab construction in March 2025. Power and water issues remain daunting challenges. Yongin is close to existing semiconductor clusters, and securing high-level talent is much easier there than in Honam. Projects like this must succeed first.

Cheon Kwang-am, an editorial writer for the Dong-A Ilbo, pointed to the case of Kaohsiung, Taiwan, noting: "TSMC began mass production of cutting-edge 2-nanometer semiconductors in Kaohsiung in just over four years. Kaohsiung's location was not outstanding. Its power came from aging thermal power plants, its water was vulnerable to drought, its land was a contaminated oil refinery site, and talent was located 250 kilometers away from the capital. Yet, the secret to its success was the flexible thinking and tremendous drive of the Taiwanese government and local authorities." Cheon noted, "The government must first show visible results from the Yongin project, which is an immediate priority. It must show at least half of Taiwan's drive to guarantee the success of the Honam project."

8. "Why Is Jeonbuk Complaining of Being Marginalized?"

This reveals internal divisions within the Honam region. The Democratic Party of Korea's Jeonbuk Provincial Chapter stated, "If investment is concentrated in a specific area, the purpose of balanced development will inevitably be undermined," adding, "Balanced investment distribution is necessary to ensure Jeonbuk is not marginalized in the process of creating a new high-tech industrial ecosystem." The Jeonbuk Pan-Provincial Committee for Attracting the Semiconductor Industry also urged, "Jeonbuk is once again being excluded from discussions on semiconductor investment in the Honam region," demanding that "Saemangeum be designated as a national strategic hub for the semiconductor industry." The Jeonbuk Provincial Chapter emphasized that Jeonbuk has sufficient competitiveness as a semiconductor industry location, citing Iksan's transportation and logistics competitiveness and Jeongeup's R&D infrastructure.

What this highlights is that while it is called "Honam semiconductors," it is actually centered on Gwangju and Jeonnam, raising concerns that Jeonbuk could be left out. It is a paradox that a project promoted under the banner of balanced national development could actually create imbalance within Honam itself.

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The 800 trillion won Honam semiconductor project: is it political compensation or economic principle? Synthesizing foreign data, the answer is: "It could be both, and what distinguishes the two is not explanations of intent, but disclosed evaluation data." Three factors—Honam's renewable energy potential, South Korea's challenge of balanced regional development, and the surging demand for AI memory—do indeed exist.

But semiconductor competitiveness comes not from slogans, but from grid capacity, ultrapure and recycled water systems, networks of talent, universities, and suppliers, and long-term supply chain stability. Based on currently public data, it is not sufficiently clear what comparative evaluation criteria the government used to choose Honam over other regions regarding these key variables. Similarly, land speculation allegations are not proven cases at this point, but are more accurately viewed as foreseeable risks that must be prevented in advance.

What is certain is that the success or failure of this project will be determined not by announcements, but by transmission lines, substations, industrial water, recycled water systems, and education and labor supply. If the government cannot even properly execute the Yongin project, the Honam project may end up as nothing more than an 800 trillion won campaign promise.


Deep Dive Q&A
Q1. Why is power supply restricted until 2032 despite the Honam region's high power potential?

A1. According to the SEMI report, although Honam has significant renewable energy generation potential, the grid capacity of substations and transmission lines to deliver this power to demand centers or semiconductor fabs has reached saturation. As a result, all substations in Honam have been designated as 'grid-constrained areas,' creating a structural contradiction where connections for new large-scale facilities are effectively restricted until the power grid is reinforced.

Q2. What is the key reason global foreign media and market research firms are expressing concern over South Korea's 800 trillion won investment announcement?

A2. Outlets like Reuters and Morningstar point out that the investment is designed under the assumption that the current AI boom will persist. If AI demand slows down in the future or the paradigm of the accelerator market shifts, it could lead to severe oversupply across the memory semiconductor industry and painful asset and facility adjustments.

Q3. Why is securing transparency in the site selection process considered a core governance challenge beyond partisan conflict?

A3. According to the OECD's report on investment incentives, when a government provides non-tax benefits (such as land and infrastructure) to specific regions or companies, unclear criteria increase the risk of discretionary actions, controversies over preferential treatment, and corruption. Disclosing evaluation data in accordance with the three principles of transparency (availability, accessibility, and clarity) is an international standard procedure to strengthen government accountability and gain public trust in policies.
※ Please note: This article was translated by AI and may contain errors.