South Korea Bets $540bn on a Southwest Chip Hub the Grid Cannot Yet Feed
Seoul wants a $540bn chip cluster in the rural southwest by 2030. The region does not yet have the electricity or the water to run it.
July 21, 2026 – 9:18 am
Image by: Canva
South Korea aims to establish its next major chip cluster in the country’s rural southwest, a project championed by President Lee Jae Myung, with an ambitious target of operation by the end of 2030. This initiative, known as the Honam semiconductor complex, forms part of a wider drive exceeding $880bn across chips, AI, and data centers, heavily reliant on Samsung Electronics, SK Hynix, and Amkor Technology Korea.
Seoul has selected a site near Gwangju military airport, spanning approximately 8.3 million square metres, for its strategic advantages including flat land, excellent transport links, and existing utilities. While the broader strategy distributes investments across regions, Honam stands out as the political focal point.
Four planned fabrication plants could eventually consume 70-80% of the annual electricity in the southwestern provinces, according to a Reuters analysis, posing significant challenges in power supply. As Neal Won, an analyst at S&P Global Commodity Insights, notes, "A huge amount of new power demand is coming into a region that previously had little, and that’s the core of the problem."
The comparison lies with Yongin, a megacluster south of Seoul, which at full capacity requires 15-16 GW, nearly a quarter of the capital region’s power demand, equivalent to ten large nuclear reactors. Currently, Gwangju supplies under 2 GW to its residents.
Water scarcity is another concern. Advanced fabs demand vast quantities of ultrapure water, estimated at 650,000 tonnes per day for the southwestern cluster. To address this, the government considers raising the Dongbok Dam by 250,000 tonnes, a measure that could impact 1,500-1,600 households.
"This is the same as dam construction," said Kim Kwang-jin, leading a group of residents near the proposed reservoir site. The Yeongsan river basin faces an annual shortfall of approximately 219 million cubic metres by 2030, raising concerns about water security.
SK Hynix’s existing facilities in Yongin already draw 265,000 tonnes of water per day from a weir in another city, suggesting the extent to which water may need to be transported for the new cluster.
Power generation politics are also at play. To bridge the gap, the government explores additional nuclear capacity and extended lifespans for ageing reactors, a proposal that has sparked opposition from residents near the Yeonggwang plant on the southwest coast:
"To now talk about new construction, on top of extending the lifespan of ageing reactors, is nothing less than a declaration that Yeonggwang will become a nuclear testing ground," said Roh Byeong-nam, a farmer and co-chair of a local anti-nuclear coalition.