ANALYSIS: South Korea's push for AI chip hub outside Seoul face power, water issues

SEOUL — South Korea's plan to build a massive semiconductor hub in the country's southwest within four years faces major challenges over its enormous electricity and water requirements, with local opposition emerging as a key obstacle.

The proposed Honam semiconductor industrial complex, estimated to cost at least 800 trillion won ($540 billion), is a major part of President Lee Jae Myung's effort to spread the benefits of the artificial intelligence chip boom beyond the Seoul metropolitan area.

However, companies involved in the project, including Samsung Electronics, will need to secure new sources of energy to support operations, with the government aiming to establish the complex before the end of Lee's term in 2030.

Analysts said electricity demand from the four planned semiconductor fabrication plants alone could account for 70% to 80% of the current annual power consumption of South Korea's southwestern regions of Gwangju, North Jeolla and South Jeolla.

Residents have opposed plans to build new transmission lines and nuclear reactors, citing concerns over existing energy infrastructure projects that they said were implemented without sufficient public approval.

They also said they were not properly consulted over plans to raise an existing dam that would supply water to the semiconductor complex.

"A huge amount of new power demand is coming into a region that previously had little, and that's the core of the problem," said Neal Won, principal analyst at S&P Global Energy.

Experts warned that without rapid expansion of power and water infrastructure, it would be difficult for the semiconductor complex to operate at full capacity by 2030.

South Korea's energy ministry said the southwestern region already produces more electricity than it consumes. If new chip fabrication plants are built there, much of the required power could come from within the region, reducing the need for additional long-distance transmission lines.

The ministry said it would work with local governments to develop energy infrastructure ahead of factory operations and improve public acceptance, including installing underground transmission lines in densely populated areas where possible.

Energy Minister Kim Sung-whan said the government may also consider constructing new nuclear reactors and small modular reactors to support rising energy demand.

INFRASTRUCTURE CHALLENGES

Previous semiconductor projects near Seoul have highlighted the difficulties of securing enough power and water for large-scale chip manufacturing.

In Yongin, a city near Seoul, SK Hynix and Samsung Electronics have been expanding chip production facilities, but the projects have faced delays due to infrastructure concerns.

Yongin Mayor Lee Sang-il said SK Hynix's first semiconductor facilities in the city, announced in 2019, were expected to receive 265,000 metric tons of water per day from a weir in another city. However, opposition from local residents delayed the process by several months.

He warned that similar disputes could affect future supplies of water and electricity from other regions.

"The responsibility to calm opposing voices and resolve differences lies with the central government," Lee said.

The South Korean government has said it plans to support Samsung Electronics and SK Hynix in accelerating construction in Yongin.

In Yeonggwang county, South Jeolla Province, farmer and local anti-nuclear coalition co-chair Roh Byeong-nam said residents would challenge any plans to expand nuclear facilities through legal action if necessary.

"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 and eventually a permanent nuclear waste site," Roh said.

Water supply remains another major challenge. The environment ministry estimates the semiconductor complex will require about 650,000 metric tons of water per day, exceeding the total daily residential water supply of Gwangju.

Developers plan to reduce reliance on new large-scale dams by using recycled water and existing dam systems, including raising the Dongbok Dam to secure an additional 250,000 metric tons of water per day.

Kim Kwang-jin, head of a residents' group near the dam, said communities should be included in discussions about the project.

"This is the same as dam construction," Kim said, estimating that 1,500 to 1,600 households could be directly or indirectly affected. "They announced it unilaterally without considering resident acceptance."

The energy ministry said raising the dam would cause less environmental damage and require fewer relocations compared with building a new dam. It added that discussions with Gwangju officials and local residents would continue to prevent opposition and infrastructure issues from delaying the project.

($1 = 1,482.2000 won)

-Reporting by Joyce Lee and Hyeyoon Cho; Editing by Brenda Goh and Lincoln Feast/Reuters