SK Hynix to spend US$64.4 billion on flash memory chip plants under broader AI investment plan

[SEOUL] SK Hynix said it would invest 100 trillion won (US$64.4 billion) to build new chip plants, including one for Nand flash memory, as part of a massive South Korean investment drive aimed at spreading returns from the artificial intelligence boom beyond Seoul.

The projects in the central city of Cheongju outlined on Thursday (Jul 2) are included in a broader US$2.1 trillion plan, unveiled by the chipmaker and its local rival Samsung Electronics this week, which also included a new chip cluster in the south-west and existing projects.

The huge capacity build-out by the South Korean chipmakers is a major political win for the country’s President Lee Jae-myung, who wants the AI windfall to help revive economies beyond the Seoul metropolitan area, though it is stoking fears of a painful reckoning if AI spending cools.

At an event on Thursday attended by Lee, SK Hynix CEO Kwak ​Noh-jung said that the company would spend 80 trillion won to build a new factory for Nand memory chip production by 2029, and 20 trillion won for a chip packaging plant by late 2027 in Cheongju.

The plan to invest 100 trillion won in Cheongju was announced on Monday, but details of the investment were not provided at the time.

South Korea is hoping that the investments will double the country’s memory chip production capacity within five years. Samsung and SK Hynix are the world’s largest manufacturers of memory chips, alongside US rival Micron.

The investments come as demand from AI hyperscalers has caused a global shortage of all types of memory chips.

Prices for both Nand flash memory, a storage chip that retains data even when a device is turned off, and dynamic random-access memory (Dram) have soared to historical highs.

Chip sell-off

SK Hynix shares ended down 15 per cent and Samsung shares closed 9 per cent lower on Thursday, hit by a global sell-off in chipmakers as Meta Platforms’ plan to sell computing power raised questions over excess AI computing capacity.

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Michael Burry, the investor whose successful bets against the US housing market in 2008 were recounted in the movie “The Big Short”, expressed caution about the massive South Korean investment plan in a subscriber-only Substack newsletter on Tuesday, The Wall Street Journal reported.

The investment drive set off alarm bells for Burry over whether the massive sums of money being poured into AI could ever generate appropriate returns, based on the report, which added that he had made more bearish bets against AI-related stocks.

“I see that as the beginning of the end,” he told subscribers.

At the SK Hynix event, Kwak expressed confidence in AI-driven demand for chips.

“While demand for Nand has been increasing and is expected to continue growing in the future, Nand supply is constrained,” he said.

SK Hynix said it planned to start construction of the new Cheongju Nand factory, known as M17, in 2027.

In April, SK Hynix broke ground on the P&T7 fab at Cheongju, a dedicated advanced packaging facility for AI memory, including high-bandwidth memory.

However, the company cautioned in a filing this week that the long-term investment plans could change, depending on global chip demand and spending by major customers.

Factors such as delays in selecting and securing construction sites could also cause it to postpone plans, it added. REUTERS