Korea’s SK Group will invest $58 billion in AI chip manufacturing

Korea’s SK Group will invest $58 billion in AI chip manufacturing

SK Group, South Korea’s chip giant, said Sunday it will raise 80 trillion won ($58 billion) by 2026 for capital expenditures. The investments will mainly be in semiconductors and artificial intelligence.

SK Group’s subsidiary, SK Hynix, is the world’s second-largest contract chip maker. Twenty CEOs from different affiliates of the Group gathered for a two-day strategy meetup at its research center in Icheon near Seoul. They discussed plans for investment and future growth according to a report byKorean news agency Yonhap.

SK Group wants to increase production of memory chips

SK Hynix is one of the main suppliers of semiconductor chips for Nvidia, which makes it one of the main income streams for SK Group. After the initial investments in 2026, the group plans to increase the investment to 103 trillion won, which is equal to $74.6 billion by 2028, according to another report by Reuters.

SK Group Chairman Chey-won said during the meeting, “The group needs to preemptively make drastic changes in the face of the new transition era.” The group is focusing on expanding its production of high-bandwidth memory (HBM) chips used to power AI. Chey-won attended the meeting virtually. He was not physically present because he was on a trip to meet tech leaders in the United States.

As the US’s artificial intelligence sector is booming, SK Group must also work on “AI value chain leadership,” said the chairman. He was referring to AI services businesses and AI infrastructure investments.

A new semiconductor committee will be established on Monday to proceed with the investment plans. The committee will operate under the SK Supex Council, the group’s top governing authority.

SK Hynix is the sole supplier of HMB3 chips

SK Hynix currently holds a major share of the market for HBM chips as it is the sole contract chip maker and supplier of the latest version called HBM3 for Nvidia. Nvidia currently holds 80% share of the high-end AI accelerator market. Chey-won said the group should pursue “qualitative growth,” by focusing on businesses with new technologies and market strength.

SK Group has 219 affiliates and is looking to streamline its business operations. According to the Yonhap report, the group wants to minimize unnecessary investments within different arms of the group and enhance cooperation among the businesses it expects to grow.

Due to high chip demand, SK Group expects a 2.2 trillion won pre-tax profit in 2024. The group was in a loss of 10 trillion won last year. For 2026, the group has set a target of 40 trillion won pre-tax profit.

During the meeting, SK officials agreed to reduce the number of subsidiaries to a “manageable range,” but the scale of reduction has yet to be decided, said Reuters. South Korea has fallen behind competitors like Taiwan in chip design and manufacturing. However, the country is home to chip manufacturers like SK Hynix and Samsung Electronics.

At the beginning of 2024, the Korean government announced a 26 trillion won (US $19 billion) package to support the country’s chip businesses. The government said it wants to keep up with competitors in the global market for chip design and manufacturing.

Cryptopolitan reporting by Aamir Sheikh.