In just 10 years, South Korea built a chip center
Latest update time：2021-09-09 18:34
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Source: The content is compiled by Semiconductor Industry Observer (ID: icbank) from " Nikkei ", thank you.
At first glance, the sprawling Samsung semiconductor manufacturing facility might seem out of place in Pyeongtaek, a region not long ago known for its sprawling ranches and military barracks that housed thousands of U.S. troops.
But the port city, 50km south of the South Korean capital, has transformed itself into a high-tech hub over the past decade.
"Ten years ago, this was a pasture that smelled of manure," said a 65-year-old taxi driver. "I didn't expect they would build such a huge structure in this place."
Under construction is the third of what will become six chip manufacturing complexes. The completed building will be 83 meters tall and 500 meters wide, and will be highlighted by a tri-color block pattern.
The project triggered an unprecedented real estate boom with the influx of a large number of workers.
"Apartment buildings are being built one after another, and I have more and more customers," the taxi driver said.
Pyeongtaek was once known primarily as a military town, with Camp Humphreys being a U.S. Army base built during the Korean War in 1951. The United States and South Korea agreed in 2004 to relocate U.S. military personnel stationed in and around Seoul to Camp Humphreys.
In return for cooperating with the relocation plan, Pyeongtaek received generous reconstruction funds from the national government. This financed an 8.16 trillion won ($7.2 billion) urban development project that began in 2006.
The plan calls for 59,000 households, totaling 144,000 people, to move into the 13.42 million square meter area. Thirteen new primary schools will serve the residents.
The project is about 60 percent complete, and a local real estate agent said apartment prices have “more than doubled since sales began three years ago.”
The cornerstone of the redevelopment project is recruiting Samsung to build new chip factories. The facilities will be built on an area of 2.9 million square meters, four times the space occupied by Kioxia's largest semiconductor complex in Yokkaichi, Japan.
The plan was initially to award Samsung a plot of land at the northern end of the redevelopment project. But the site is about 2 kilometers from the US Air Force base.
Samsung eventually requested a site more than 5 kilometers south of the air base. The slightest vibration from a takeoff or landing would reduce chip production.
Construction of a third building was announced in May and will contain clean rooms that can accommodate 25 football fields. Nearby is a substation operated by Korea Electric Power. Roads and private waterways serve the complex.
Suppliers have already established their own locations nearby. Chip-making equipment makers such as Dutch company ASML and U.S. Applied Materials have set up various "frontline bases." All in all, hundreds of businesses regularly visit the Pyeongtaek campus.
Pyeongtaek estimated that each Samsung chip manufacturing plant would create 20,000 jobs. More than 1,000 people moved to the city, and the population grew 30% in a decade to 540,000.
The population is expected to double by the time the redevelopment project is completed.
"Bringing in Samsung will lead to a significant increase in tax revenue," said a city official.
South Korea's economy is highly dependent on exports. Semiconductors account for a fifth of all exports, making them the top-ranked among all other categories.
As semiconductors are the biggest economic driver, the government has been generous with its support. During a visit to Pyeongtaek in May, President Moon Jae-in unveiled a $451 billion plan to turn the country into a “semiconductor powerhouse.”
Moon's plan includes tax breaks for semiconductor capital investment and research, as well as more than 1 trillion won in new low-interest loan programs and government aid to ensure power and water supplies.
More national universities will also offer majors in related fields, with the goal of training 36,000 semiconductor experts in the next 10 years.
“Competition among semiconductor companies has now begun to attract countries,” Moon said.
"My government will also work with businesses as a team to keep South Korea a semiconductor powerhouse," he said.
Pyeongtaek is Samsung's third-largest chipmaking center in South Korea, after Giheung and Hwaseong. The world's largest supplier plans to spend most of its more than $25 billion in annual capital investment in Pyeongtaek to boost memory chip production capacity.
Samsung is particularly interested in building mass-production capabilities for cutting-edge semiconductors, an area where it faces stiff competition from TSMC.
Chipmakers typically consolidate production into a few centers because semiconductors are small and lightweight, making them cheap to transport. Samsung decided to focus its resources in Pyeongtaek because the greater Seoul area almost never experiences earthquakes and has an abundant water supply. The Giheung and Hwaseong hubs are also less than 30 kilometers apart, making it easier for technicians to move between facilities.
Semiconductors, which power everything from smartphones to cars and weapons systems, are now a $400 billion-plus industry with major implications for foreign policy and national security. It’s a flashpoint in the competition between China and the U.S. Other countries are also rushing to step up production, with Japan vying for TSMC to set up a plant there.
Samsung has positioned the Hwaseong plant as its R&D command center and the Pyeongtaek plant as its cutting-edge chip manufacturing center. It also has factories in Xi'an and Austin, investing in China and the United States to try to address the growing gap between the two countries.
Meanwhile, back home, Samsung has been busy courting the Moon Jae-in government.
When Moon unveiled his plans for the semiconductor industry, Samsung announced 38 trillion won in new investments, including a new wing at its Pyeongtaek plant. About a week later, shortly before Moon met with U.S. President Joe Biden, it announced it would spend $17 billion to build a new U.S. plant at an event in Washington.
Both announcements provided Moon with a major political boost at a critical time.
"I'm particularly pleased that so many leading South Korean companies see the benefits of investing in the United States," Biden told reporters after the summit.
He asked Samsung Vice Chairman Kim Ki-nam and other South Korean executives to stand and ovate, adding that their investment "will help consolidate and protect the supply chain for products such as semiconductors."
South Korea's conglomerates often announce big investment and job creation plans in conjunction with the president's overseas trips, and were likely urged to do so to build goodwill for the U.S. summit. Samsung, Hyundai Motor, SK Group and LG Group jointly announced 44 trillion won in investments in the U.S.
But the statistics include projects that were already in the works, on the table long before the summit, or still early in the planning stages. Samsung, for example, hasn’t even decided on the site for its proposed U.S. factory.
More than anything, these investments represent nunchaku—the art of reading the room that is crucial in Korean society.
Meeting the government's expectations is particularly important for Samsung, whose vice chairman and de facto head Lee Jae-yong has been jailed since January for bribing former President Park Geun-hye.
Now, five months after Lee was sentenced, talk has begun of a possible pardon — a power reserved exclusively for the president. Those seeking clemency for the vice chairman, including Samsung itself, are gauging the mood in Seoul, especially Moon Jae-in, as he moves forward.
Business lobby groups have sent a joint statement to the presidential Blue House asking for Lee's pardon. A poll by Hankook Research last month showed 64 percent of respondents supported a pardon.
This pressure seemed difficult for Wen to cope with easily.
The South Korean president had previously rejected any idea that he would pardon the Samsung scion. But his tone has changed significantly recently.
Moon told business leaders at a June 2 lunch that "many members of the public sympathize" with pardoning Lee.
“I will listen carefully to people’s opinions and make a decision,” Moon said at a news conference last month.
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