New state-backed foundry targets legacy and defense chips
South Korea is considering establishing a 4.5 trillion won (about $3.06 billion) semiconductor foundry, funded by both the state and private investors.
The proposed South Korea $3.1 billion foundry would be a 12-inch, 40-nanometer facility aimed at manufacturing so-called legacy chips. These mature-node semiconductors are used in cars, data centers and industrial equipment and have remained tight since the pandemic shock.
The plant is intended to give domestic fabless firms affordable access to production and testing capacity, according to the ministry’s statement. Officials also want the foundry to reduce dependence on foreign defense semiconductors. The ministry says about 99 percent of defense-related chips are currently imported.
To coordinate policy, the government plans a special presidential committee on semiconductors and is considering legal clauses that would require priority purchase of domestic chips for national security infrastructure.
Seoul races to fix fabless and foundry gap
President Lee Jae Myung chaired a high-level meeting on December 10, 2025 with executives from Samsung Electronics and SK Hynix to discuss how to keep South Korea’s lead in memory while strengthening its lagging logic and foundry segment and expanding fabless chip design in the AI era.
South Korea dominates memory, with government-linked research citing about 60.5 percent of the global memory semiconductor market and roughly 70 percent of DRAM shipments. Yet the same work puts the country’s share of the non-memory market at just 3.1 percent and notes that its fabless market share is under 1 percent, while the foundry share is about 17.3 percent. This mismatch is a core reason officials say the South Korea chip sector must move beyond memory.
Over the last several years, ministries have rolled out measures to support the system semiconductor ecosystem, including the Fabless-Foundry Council for Mutual Growth and the “Fabless Challenge” program that gives startups free prototype runs and targeted funding with domestic foundries such as Samsung Electronics and DB HiTek.
The proposed foundry is framed as another piece of that toolkit, focused on legacy chips rather than cutting-edge AI accelerators.
What the foundry means for AI chip demand and supply chains
Industry Minister Kim Jung-kwan warned that competition in semiconductors has shifted from rivalry between companies to a “war between nations”, citing parallel subsidy pushes in the United States, Europe, China and Japan. The new project is designed to stop fabless firms from routing designs offshore, especially for mature-node chips that are central to autos, industrial controls and certain AI infrastructure components.
Analysts already expect the South Korea foundry market to reach about $23.1 billion in 2025 with steady growth through 2030, supported by policy incentives such as the K-SEMICON framework. A dedicated public-private legacy node plant would insert the state more directly into that landscape, in parallel with earlier talk of a larger state-backed foundry concept known as KSMC, which has not yet moved beyond proposal stage.
Unverified: The government has not released a public siting decision, construction timetable or environmental review for the proposed foundry, and the full text of the industry ministry’s December 10 statement is not available on its English press portal as of publication. Those missing documents will determine how quickly the $3.1 billion plan can translate into actual capacity.
