Insights

[Energy Forum] Honam Semiconductor Industrial Complex:
The Essence is a National Strategy, Not Regional Allocation

ㅣ Karl Yang, Founder & Executive Director of KoSIF ㅣ

A heated debate has erupted over the recent announcement to establish a semiconductor industrial complex in the Honam region (southwestern Korea).

Critics point out limitations in power and water supplies, a shortage of specialized talent, the lack of an ecosystem for materials, parts, and equipment (MPE), and the distance from existing semiconductor clusters. Semiconductors represent an ultra-precision industry where astronomical amounts of capital are invested, and miniscule differences in yield determine a company's survival.

Therefore, criticisms evaluating the feasibility of the location, the stability of infrastructure, and the sustainability of investment are naturally necessary. The location of a core national strategic industry cannot be decided without rigorous verification. However, we must ask a much deeper question here: Does a long-term strategy for the future of South Korea's industry truly exist within the logic currently opposing the Honam semiconductor complex?

We must not draw the conclusion of "so, let's not do it" simply by pointing out that "the power grid is currently insufficient," "water is currently lacking," or "talent and ecosystems do not exist right now." The essence of national industrial policy is not to find a place where all conditions are already perfect and just place a factory there, but rather for the state to preemptively create the conditions needed for the future.

Pohang was not a steel city from the beginning, nor were Ulsan and Gumi born as centers for shipbuilding, automobiles, and electronics. Today's industrial map was made possible because the state looked 30 to 50 years ahead at the industrial structure and external competitiveness, selected the locations, and built the necessary infrastructure, including power, ports, roads, manpower, finance, and institutions. An industrial city is not the byproduct of pre-existing conditions, but the result of artificial conditions shaped by the nation toward the future.

Thus, the right question to ask right now is not "Does Honam already have everything in place?" Instead, the question must be: "In the era of AI, carbon neutrality, and supply chain restructuring, is there a reason for South Korea to strategically create a new semiconductor hub?" If we stick to concentrating exclusively on the Seoul metropolitan area and existing clusters based purely on current efficiency, it is not a strategy—it is a neglect of the future.

Dispersing hubs for core national strategic industries is not a favor or a political consideration for a specific region. It is a national strategy to manage a fatal risk to the entire South Korean industrial ecosystem.

Currently, semiconductor investments are rapidly concentrating in the metropolitan area and the Chungcheong region, particularly centered around Yongin. In the short term, gathering more resources near the existing ecosystem may seem efficient. However, a structure that puts all of the nation's future assets into a single basket is not efficient; rather, it only exposes vulnerability.

As the semiconductor industry concentrates in the metropolitan area and adjacent regions, serious constraints are already emerging in terms of power grids, water supply, site acquisition, transportation, housing, and environmental acceptability. In the event of sudden water outages due to climate disasters, power grid failures, geopolitical shocks, supply chain paralysis, or large-scale disasters, relying on a single or overly concentrated production hub could put the nation's entire industry at risk. Semiconductors are no longer just commercial commodities; they are national security assets. If so, the long-term dispersion of semiconductor hubs is not an option, but an essential condition for survival.

Furthermore, global semiconductor competition in the AI era is not merely a matter of "how much electricity can be secured." Going forward, the core of competitiveness will be "what kind of electricity can be supplied, how stably, and with how low a carbon intensity." Supply chain carbon management requirements from global clients, pressure to procure RE100 and 24/7 carbon-free energy, verification of product carbon footprints, and the spread of carbon trade regulations will increasingly act as major costs and entry barriers for the semiconductor industry. In the future, semiconductor competitiveness is highly likely to be driven not only by fine processes and yields, but also by the carbon footprint of the electricity embedded in the product.

This is where the significance of Honam lies. Honam has great potential for expanding renewable energy, such as solar power and offshore wind, and is a region that can take a leading role in establishing a long-term carbon-free power supply system.

Of course, this potential does not immediately translate into a 24-hour stable power supply capability. Semiconductor fabs must operate stably 24 hours a day, 365 days a year. Intermittent renewable energy alone is not enough. Therefore, the key lies in whether Honam’s renewable energy potential can be combined with nuclear power, long-term power purchase agreements (PPAs), energy storage systems (ESS), pumped-storage hydroelectricity, demand response, power grid reinforcements, and grid management technology to design an industrial 24/7 carbon-free power system.

The Honam semiconductor industrial complex must become a massive national project to demonstrate this future-oriented power system. We cannot succeed by simply stacking factories on top of an outdated power grid. Industrial location, power grids, carbon-free power procurement, carbon neutrality, and regional industrial policy must be integrated and designed from scratch. If this is achieved, the Honam complex will not be a mere industrial park, but an integrated energy-industrial model preparing for the next 30 years of South Korea’s semiconductor industry.

The water issue is no different. In the era of the climate crisis, water is a limiting factor in any region. Therefore, what matters is not just "where is water abundant," but "who will be the first to create global standards for ultrapure water production, industrial water reuse, wastewater recycling, and circular water management technologies." Water usage in the semiconductor industry will become a core issue for global environmental regulations and regional community acceptance. From the very beginning, the Honam complex must be designed as a circular industrial park that increases water reuse rates, localizes the ultrapure water supply chain, and combines water resource management with process efficiency.

The issues of talent and the ecosystem cannot be avoided either. A sustainable cluster cannot be created by temporarily drawing talent away from the metropolitan area. We must foster long-term expertise in advanced packaging, power semiconductors, AI chips, equipment maintenance, and ultrapure/low-carbon processes by linking regional universities, specialized high schools, research institutions, and corporate research labs. The MPE (materials, parts, equipment) ecosystem should also not be approached with the mindset of having everything from day one, but rather by selecting strategic areas and nurturing them step-by-step.

Consequently, the Honam semiconductor strategy should not approach the project by trying to relocate all processes at once or create a fully realized front-end process cluster from the beginning. A realistic strategy is to start with advanced packaging, power semiconductors, AI semiconductor testbeds, ultrapure/low-carbon process demonstrations, links with renewable energy-based data centers, and MPE demonstration complexes, and then expand progressively. The important thing is not "can we do everything right now," but "can we create a new axis for South Korea’s semiconductor industry 10 or 20 years down the road.“

For this reason, critics should not argue for a simple policy of impossibility. If they truly worry about the nation's future, they should ask "what conditions must be met to make it successful," rather than saying "let's not do it because the conditions aren't met." Responsible criticism means demanding and monitoring concrete execution plans, such as: Which sections require power grid reinforcement? From what water sources and through what reuse systems will water be secured? How will binding investment commitments from corporations be obtained? How will regional universities and the talent development system be restructured? What incentives will be used to attract MPE companies? Denying it without offering alternatives will only cause the nation to abandon its own opportunity to redesign its future industrial landscape.

Of course, supporters must not just echo irresponsible slogans for attraction. Simply demanding "give Honam a semiconductor complex too" cannot qualify as a national strategy. Those advocating for the Honam complex must present a detailed execution roadmap that includes power, water, talent, housing, transportation, environmental acceptability, MPE linkages, corporate investment commitments, and carbon reduction responsibilities. The government should boldly support the infrastructure while explicitly demanding public responsibilities from corporations, such as investment fulfillment, job creation, utilization of local talent, carbon reduction, water reuse, and technology transfer. National strategy is proven by the ability to execute, not by declarations.

The Honam semiconductor industrial complex is not a charitable gift thrown to the Honam region. It is a long-term strategic move addressing five national challenges simultaneously: easing overcrowding in the metropolitan area, securing industrial security, responding to carbon neutrality, overcoming regional extinction, and securing semiconductor competitiveness in the AI era. The essence is the redesigning of the national industrial portfolio, not regional allocation.

South Korea currently stands at a crossroads: whether to build higher on top of the existing formula for semiconductor success, or to newly design it to fit the conditions of the next era. There is no need to deny the efficiency of existing clusters. However, efficiency alone does not complete a national strategy. On top of efficiency, we must add resilience, carbon competitiveness, security, and regional extensibility. That is the new industrial policy for the era of AI, carbon neutrality, and supply chain restructuring.

The proponents must arm themselves with firm execution plans and public responsibility, while opponents must look beyond cynical rejection and contribute wisdom to refine the conditions that will make this national project a reality. The fiercer the debate and counterarguments, the better. However, the scale of judgment must not be short-term profit and loss calculations, but long-term national benefit.

The success or failure of the Honam semiconductor industrial complex is not the success or failure of a specific region. It is a test of whether South Korea is a nation capable of designing its own future industrial map. Moving beyond political declarations to tie power, water, talent, technology, and corporate responsibility into a single, actually functioning semiconductor hub—that is the role of a nation preparing for the future, and the true duty of industrial policy.