Global Market: Samsung, SK Hynix reject $18.7 billion upfront power payment proposal

Samsung Electronics and SK Hynix have rejected a proposal from South Korea's state-run Korea Electric Power Corp (KEPCO) to make a 25 trillion won ($18.7 billion) upfront payment to support electricity infrastructure for planned semiconductor mega clusters, according to a document submitted to a lawmaker.

The two chipmakers told KEPCO that accepting the proposal would be difficult following internal reviews, the document showed. The office of lawmaker Lee Chul-gyu shared the document with Reuters.

Chip demand uncertainty raises concerns

The companies also questioned whether such a large upfront payment was necessary, given uncertainty over the long-term durability of semiconductor demand, a company official in Seoul told Reuters.

KEPCO seeks funding for power infrastructure

The proposal comes as South Korea moves ahead with plans to develop large semiconductor clusters that will require significant new electricity supplies and supporting infrastructure.

According to the document, KEPCO proposed that the chipmakers pay in advance for electricity expected to be consumed by their new fabrication plants. The upfront funds would allow the utility to invest in the infrastructure needed to supply power to the facilities.

South Korea is seeking to strengthen its semiconductor manufacturing base as chipmakers expand capacity to meet growing demand for advanced chips, including those used in artificial intelligence applications.

Read more: Global Market: South Korean shares fall as AI concerns weigh; won strengthens

Huge power requirements for chip plants

Semiconductor fabrication plants are highly energy-intensive, making reliable electricity supplies a critical part of large-scale expansion plans. Building the necessary transmission and power infrastructure can require substantial investment before new facilities begin commercial operations, Reuters said.

The dispute over the proposed advance payment highlights the financial and planning challenges surrounding South Korea's semiconductor cluster strategy, particularly as companies weigh large capital investments against uncertainty over future chip demand.

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