Taiwan watches Korea's 3 mega-projects with concern, insists on 'absolute edge'

Voices of concern are emerging in Taiwan — home to TSMC, the world's largest foundry — over South Korea's sweeping plans to invest in semiconductors and AI.

Taiwanese media outlets including Lianhe Bao and China Times reported Monday that Liu Pei-chen, a researcher at the Taiwan Institute of Economic Research, said Korea's announcement of three mega-projects — covering semiconductors, AI data centers and physical AI — would intensify direct competition between Taiwan and South Korea.

Liu said the massive Korean investment would serve as a genuine incentive for Taiwan to accelerate its research and development in advanced process technology. He added, however, that Taiwan's irreplaceable value as a global semiconductor hub would remain intact.

Lin Wei-chih, executive vice president of the Zhifu Industry Trend Research Institute and a former strategic vice president at Taiwan's Foxconn (Hon Hai Precision Industry), said Korea's plan focuses on capturing spillover effects from the AI market and is modeled on the science parks central to Taiwan's semiconductor success.

Lin warned that if global demand slows, South Korea will face challenges from weak domestic consumption and high depreciation costs, while Taiwan — having already reached a mature stage — will retain a solid competitive core. Assuming AI demand softens around 2032, he said, government-led projects in Korea typically take five to six years to complete, meaning factory equipment may not be fully depreciated by then, leaving Korea exposed to greater risk than Taiwan.

He also noted that building a semiconductor cluster takes a long time, pointing out that China has invested a decade in the effort and still has not surpassed Taiwan — and that South Korea, unlike China, lacks a vast domestic market.

Taiwanese experts said the semiconductor industry is inherently capital-intensive, and that Korea's investment in the Honam region is primarily aimed at easing pressure on land, water, power and costs in the Greater Seoul area.

Massive investment inevitably generates enormous fixed depreciation costs, they added.

The experts warned that because South Korea's economy is dominated by large technology conglomerates, a slowdown in demand or a drop in utilization rates could see depreciation eat into corporate profits, trapping those companies in a "capex trap."

The South Korean government and companies including Samsung Electronics and SK hynix announced Sunday a semiconductor investment plan worth about 1,500 trillion won, including an 800 trillion won ($519 billion) production hub in the Honam region. When longer-term investment plans separately disclosed by the companies are included, the total reaches the 4,700 trillion won range.