Korea’s top 4 conglomerates pledge $40 bn investment in US

Samsung Group, Hyundai Motor Group, SK Group and LG Group, companies unofficially accompanying South Korean President Moon Jae-in on his state visit to the White House, have pledged to invest a total of $40 billion in the US.

Of this amount, a significan chunk will come from Samsung Electronics Co. to build a new semiconductor foundry plant in the US.

“We are planning to invest $17 billion for a new foundry plant in the US. Samsung will contribute to the economic growth of both South Korea and the US,” said Samsung Electronics Vice Chairman Kim Ki-nam on May 21 during the South Korea-US Business Roundtable held at the US Department of Commerce in Washington D.C.

While there has been much speculation around Samsung’s US investment plans, Kim’s remark is the first official announcement on the topic at the CEO level. But Samsung did not specify where the new chip factory will be built in the US.

“Nothing has been decided yet regarding the factory site. We are still in talks with relevant local governments in the US,” said a Samsung spokesperson. 

Analysts say that the factory is most likely to be constructed near its existing foundry facilities in Austin, Texas, established in 1998.

Samsung's Austin plant’s main product is the 14-nanometer chip, considered suitable for general purposes but not competitive enough for use in the latest innovations across various industries. Industry analysts say that the new plant will be producing 5-nanometer chips, the first among the company’s overseas facilities.

In January, Samsung already asked Austin's local government for a tax reduction of $805 million over 20 years, highlighting the economic benefit of the $86 billion that its new plant would be bringing to the city.  

The states of New York and Arizona are also potential candidates. It is reported that Samsung is tapping local governments in the two states to request a larger tax incentive than that proposed to the city of Austin. However, the analysts say Arizona is an unlikely choice, highlighting that the potential factory site in Arizona failed to bid for the sale on May 19, after another bidding failure last month. The next bidding date is scheduled for June 10.

Wherever the plant may be built, it is set to be the single largest investment conducted by Samsung Electronics, after making a $10.8 billion investment in 2012 in the city of Xian, China.

Prior to Samsung’s announcement to invest big in the US, Hyundai Motor Group already shared its ambitious investment plan to funnel $7.4 billion into the US by 2025.  

Likewise, South Korea’s leading petrochemical and battery company SK Innovation Co. signed an agreement with Ford Motor Co. to set up a $5.3 billion joint venture to support the US auto giant’s rollout of electric vehicles. The 50-50 JV, named BlueOvalSK, will manufacture batteries in the US with sufficient capacity to charge some 600,000 all-electric pickup trucks annually.

SK Innovation has already invested $2.6 billion to build its first EV battery plant in the state of Georgia, set to begin operations in 2022. The second EV battery plant to be built by 2023 is also under construction in the same area. The two plants will have a combined production capacity of 21 GWh a year, enough to supply power to 300,000 EVs annually.  

During South Korea’s state visit to the US, another SK affiliate SK Hynix Inc. said it will spend $1 billion to build a large-scale R&D center focusing on AI technology and NAND solutions.

Likewise, LG Chem Ltd.’s battery unit LG Energy Solution Ltd. and General Motors (GM) Corp., which established battery-making joint venture Ultium Cells LLC in December 2019, will build their second US battery cell manufacturing plant in Tennessee, in addition to the first already under construction in Ohio.

LG Energy Solution and GM plan to build a combined production capacity of 70GWh a year, enough to power 1 million EVs annually. LG Energy Solution said it will invest an additional 5 trillion won ($4.4 billion) to secure a further 70GWh in capacity independent of its joint venture with GM.

“Korea and the United States will grow together by strengthening investment and supply chain collaborations in the semiconductor and EV battery sectors,” said President Moon Jae-in at the South Korea-US Business Roundtable.

Write to Jeong-soo Hwang at hjs@hankyung.com
Daniel Cho edited this article.