Op-Ed: Political clock threatens South Korea chip megaprojects

SEOUL, July 9 (Asia Today) --This commentary is an outside opinion column written by Young-Han Kim, a professor of economics at Sungkyunkwan University.

On June 29, the presidential office announced the "Three Megaprojects for South Korea's Great Leap Forward" and presented them as the signature policy of President Lee Jae Myung's second year in office.

The plan calls for building four ultralarge memory fabs worth 800 trillion won ($522.4 billion) in the Honam region, developing the Chungcheong region into a hub for AI data centers and advanced packaging and nurturing the Yeongnam region as a center for physical AI and supply chains for materials, components and equipment. The government says the plan is designed to mobilize 1,500 trillion won ($979.6 billion) in private investment.

At a public-private inspection meeting Monday, the former Gwangju military airport site was confirmed as the location for the Honam semiconductor cluster. The president said "only speed matters," ordered a shortened environmental impact assessment period and instructed officials to proceed with negotiated land purchases and compulsory expropriation procedures at the same time. He also said the presidential office would create a dedicated body to oversee the project directly. In response to opposition criticism, he said, "Even if you cannot cooperate, do not interfere."

The diagnosis that the Seoul metropolitan-centered system has reached structural limits is understandable. So is the balanced development goal of creating a new growth axis in the southwestern region, where renewable energy potential and available land are abundant.

The problem is not the policy's intention. The problem is the way the policy is being drafted and implemented.

The current policy drive appears risky because it treats the verification process essential to all public policy, especially large-scale public projects, as political resistance. Three structural risks must be reviewed.

First is the possible damage to agglomeration efficiency. The source of semiconductor competitiveness is not an individual factory. It is the ecosystem of research and development, materials, components, equipment and skilled workers built over decades in Yongin, Pyeongtaek and Icheon.

A decision to disperse production bases to the southwestern edge of the country could result not in the replication of that ecosystem but in its division.

Second is the big-cycle risk that defines the semiconductor industry. As the sharp downturns of 2018-19 and 2022-23 showed, semiconductors are an industry with extreme demand volatility.

If the AI-driven boom passes its peak and a downturn coincides with the completion of new fabs, hundreds of trillions of won in facility investments rushed to fit a political timetable could become oversupply and a financial burden for companies.

Third is the rigidity of the decision-making structure. The moment even reasonable concerns are dismissed as partisan attacks, the feedback mechanism needed to correct policy errors early is cut off.

Controversy has not subsided over whether political pressure operated behind the claim that companies made voluntary decisions. That is because doubts remain that the scale and timing of investment were derived from a political calendar rather than market logic.

Given these concerns, institutional safeguards are needed to spread economic and social risks during the implementation phase of the megaprojects.

First, the government's speed in building infrastructure must be separated from the flexibility companies need in making facility investments.

The government should build preliminary infrastructure with long lead times, including land preparation, power supply and water supply networks, as quickly as possible. At the same time, companies should be guaranteed flexibility by investment stage so they can adjust fab equipment investment and production start dates according to the global supply cycle.

The government may claim the political achievement of selecting construction sites and breaking ground. But the timing of hundreds of trillions of won in facility investment and the specific production strategy should be determined by markets and companies.

Considering the risk of delays in the prerequisite task of relocating the military airport, such a phased design is not optional. It is essential.

Second, if the state, not companies, decided and designated the investment location for a megaproject, the state should absorb the additional costs and economic burdens that follow.

Differentiated tax credits and subsidies for government-directed investments outside the capital region should be codified through measures such as the K-Chips Act. Power and water infrastructure should be completed with national finances before companies begin construction to eliminate investment uncertainty.

The construction of large-scale power grids and stable renewable energy supply systems essential to advanced manufacturing processes is the key to turning the southwestern region's potential advantage into real competitiveness.

Third, semiconductor fabs cannot function without a workforce ecosystem.

Rather than forcing talent from the Seoul metropolitan area to relocate permanently, workforce policies should support a dual-base work model linking Gwangju and research hubs in the metropolitan area. These policies should include expanded high-speed transportation networks, income tax cuts for relocated workers and specialized semiconductor graduate schools linked to regional universities.

Fourth, the Honam semiconductor cluster should be designed not as a replica of the Seoul metropolitan region but as a specialized expansion of it.

It should focus on next-generation memory, including high-bandwidth memory, and build an intraregional value chain directly connected to packaging and AI data center demand in Chungcheong. That design would lower dependence on the metropolitan region while maximizing synergy among the three axes of the megaprojects.

Fifth, future public-private inspection meetings on the megaprojects should not be operated as forums to pressure officials and companies to move faster. They should instead serve as forums for reviewing global supply and demand in the semiconductor market.

An independent evaluation mechanism should be established to adjust the investment road map in line with market conditions and prevent political schedules from overriding market realities.

The government should institutionalize regular supply and demand outlook reports by industrial analysis organizations to provide an objective basis for adjusting investment speed. This would guarantee institutional flexibility so both the government and companies can make needed course corrections according to market conditions.

The clock of South Korean politics currently runs on a single five-year presidential term. The clock of semiconductors runs on the rhythm of business cycles.

For the megaprojects to remain as a historic achievement of the South Korean economy, not merely as a political event marked by "groundbreaking within the term," criticism of the megaprojects should be institutionalized, not excluded.

The basic principle should be clear: A speed-driven campaign for public investment in industrial infrastructure is the government's role, but facility investment and production should be decided by companies based on market conditions.

Young-Han Kim is a professor of economics at Sungkyunkwan University.

Editor's note: The views expressed in this column are those of the author and do not necessarily reflect those of Asia Today.

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This story was originally published July 10, 2026 at 10:27 AM.