This afternoon, South Korea is going all-in on the next decade of its national fortunes

Original: Odaily Planet Daily (@OdailyChina)

Author: Azuma (@azuma_eth)

South Korea's presidential office said on Sunday that Samsung Group and SK Group will announce major investment plans on Monday during a meeting chaired by President Lee Jae-myung. Details will be disclosed at a briefing held at the Blue House at 2 PM local time (1 PM Beijing time). Samsung Group Chairman Lee Jae-yong and SK Group Chairman Chey Tae-won are both expected to attend the event.

South Korean media outlet The Economic Daily revealed more details about the plan today.

According to reports, as part of President Lee Jae-myung's flagship industrial strategy, Samsung Group and SK Group are expected to jointly announce a total investment plan worth 2,000 trillion Korean won (approximately $1.3 trillion USD). Over the next decade, the two companies will continue to increase investment in South Korea's domestic semiconductor industry. Specifically, Samsung and SK Hynix are expected to build 4 to 5 semiconductor fabs each in Gwangju. Samsung also plans to construct a chip packaging plant in South Chungcheong Province, while SK Hynix will expand its NAND fab in North Chungcheong Province.

As of press time, neither the South Korean government nor the two companies have officially released the complete plan, and final details may still be subject to adjustments. However, judging by recent signals from the South Korean government and information disclosed by local media, the direction of "heavily investing in semiconductors over the next decade" is essentially without悬念.

The significance of this move extends far beyond mere capacity expansion by the two memory giants, Samsung and SK Hynix. On a broader level, this is an industrial strategy directly orchestrated by the South Korean government, and also a public bet on the AI era.

Over the past few years, the race around large-scale model training and AI data center construction has intensified. One of the key infrastructures supporting this race is high-performance memory. As a central player in the global memory industry, South Korea has consistently held the most irreplaceable position in the AI supply chain.

Now, by pushing Samsung and SK Hynix to launch a trillion-dollar investment plan spanning a decade, the government is essentially sending a clear signal to the market: South Korea believes that AI's demand for high-performance memory is not a short-term cyclical boom, but an industrial wave that will last for at least a decade or more. Therefore, it is willing to commit its capital expenditure over the next ten years to bet on this judgment.

Why is South Korea Taking Such a Bold Bet?

What does $1.3 trillion USD mean?

In 2025, South Korea's total GDP is approximately $1.87 trillion USD. This means the investment plan is nearly 70% of the country's entire annual economic output. As for the main investors in this plan, Samsung and SK Hynix, the former has a current market cap of about $1.34 trillion, while the latter is around $1.2 trillion. This implies that these two pillar conglomerates of South Korea are betting roughly half of their market value on a decade-long expansion plan.

Why is South Korea willing to make such a huge bet on the memory industry, which is known for its strong cyclicality? The answer lies in the changes the memory industry has undergone over the past year.

For decades, memory has been one of the most cyclical sectors in the semiconductor industry. The industry has almost always followed the same pattern: rising demand drives up prices, manufacturers aggressively expand capacity, new supply leads to oversupply, prices crash, and then the cycle begins anew. Consequently, most semiconductor companies rarely plan production capacity on a ten-year horizon.

Everything changed with the advent of AI. As the AI competition escalates, models become larger, and inference demand continues to grow, the market has gradually realized that the true bottleneck limiting AI compute power is no longer just GPUs, but also High Bandwidth Memory (HBM). GPUs determine the ceiling of computing power, but HBM determines whether GPUs can actually perform optimally. This makes memory bandwidth a key constraint on AI compute expansion. The larger the model, the more parameters, and the more frequent the inference, the higher the demand for high-bandwidth, high-capacity memory.

In short, the rapid development of AI has propelled memory from a relatively low-key supporting role to the center stage of the entire industry chain.

This change quickly reflected in the industry and capital markets. Massive orders from global AI chipmakers, cloud computing giants, and hyperscale data center operators have made SK Hynix, Samsung, and Micron the biggest beneficiaries of global AI capital expenditure. The rapid surge in performance and forward guidance has continuously revised market expectations for the valuation of the memory industry.

Facing this frenzied market demand, the HBM orders of the three major manufacturers are generally booked years in advance. The entire industry is continuously raising capital expenditure, hoping to release more advanced capacity as soon as possible to gain a larger market share.

For these reasons, the capacity expansion by Samsung and SK Hynix is not surprising in itself. However, what is different this time is that the entity taking the lead is not just the companies, but also the South Korean government. Clearly, what South Korea aims to consolidate is not just the market share of Samsung and SK Hynix, but the country's strategic position in the global AI infrastructure.

Can South Korea Win?

Of course, this grand ten-year investment plan inevitably raises a question that all memory investors are pondering: Is the memory industry still cyclical? Or, should memory still be valued as a cyclical stock?

For decades, the market has been accustomed to the operating rhythm of the memory industry: demand explosion, price surge, aggressive capacity expansion, oversupply, price crash, and then the next cycle... Consequently, memory companies have long struggled to command a growth stock valuation premium.

However, the emergence of AI has challenged this logic for the first time. AI's demand for high-performance memory far exceeds any previous technological iteration. Furthermore, producing the same storage capacity in HBM consumes significantly more wafer capacity than traditional DRAM. This means that even if the three major manufacturers continue to expand capacity, it will take much longer for the new supply to actually come online. That's why the market still generally expects the HBM supply-demand tightness to persist for several more years.

But on the other hand, this does not prove that the cycle has disappeared. If the new capacity of the three major manufacturers comes online in the coming years, and the growth rate of AI demand begins to slow down, then the current supply-demand imbalance supporting the industry's high profitability and high valuation may eventually rebalance.

In other words, AI might be able to change the length of the cycle, but it might not be able to change the cycle itself.

The answer South Korea gives today is a willingness to commit its capital expenditure over the next decade, betting that AI demand for memory will continue to grow. Whether this ultimately means the memory industry has bid farewell to cycles forever, or is entering an unprecedented supercycle, only time will tell.