Korea's $1.3 trillion strategy lands, semiconductor equipment stocks surge, ASML hits record high.

On June 29, South Korean President Lee Jae-myung chaired a national report meeting at the Blue House on the "Three Major Super Projects for the Great Leap of the Republic of Korea," where Samsung Electronics Chairman Lee Jae-yong and SK Group Chairman Chey Tae-won jointly announced investment plans on stage. The strategy, centered on "semiconductors, AI data centers, and physical AI," covers the period from 2026 to 2036, with a total investment of approximately 2,000 trillion Korean won (about $1.3 trillion), an investment scale 7.8 times that of TSMC's investment in Arizona, USA ($165 billion).

The news spurred a surge in semiconductor equipment stocks. On Tuesday, ASML closed up 6.8% in Amsterdam, hitting an all-time high. In New York, Applied Materials closed up about 4%, and KLA closed up 8%.

Huatai Research noted that related overseas companies in the industry chain include lithography leader ASML, Applied Materials, Tokyo Electron, and other major front-end equipment suppliers, as well as Kokusai Electric, which has a high proportion of storage revenue. Among Chinese companies, cleaning equipment manufacturer ACM Research (Shanghai), and thermal processing equipment manufacturer YiTang Semiconductor have business layouts in South Korea and continue to play important roles in the industry chain.

The logic is simple: Four new fabs from South Korea's two memory giants mean significant demand for lithography machines, thin film deposition equipment, and inspection systems, with the main suppliers being ASML, Applied Materials, and KLA.

This rally extends the strong performance of the semiconductor sector this year. The Philadelphia Semiconductor Index nearly doubled in the first half of this year, rising over 86% in the second quarter, its strongest quarterly performance on record. However, sector volatility remains severe—the index fell 7.9% last week, its worst weekly performance since early April, before rebounding as investors returned to AI infrastructure-related stocks.

Susquehanna analyst Mehdi Hosseini remains bullish on semiconductors, citing continued strong industry demand. Another institution forecasts that global wafer fab equipment annual spending will reach $250 billion by 2028.

South Korea's $1.3 Trillion Strategy: Full Restructuring of Industrial Geographic Space

The core logic of this strategy is to break the industrial monopoly of the Seoul capital area and tilt national resources toward regions outside the Seoul capital area.

Previously, South Korea's semiconductor industry chain was highly concentrated in the Seoul-Yongin capital area. The Yongin cluster houses most advanced system chips and memory R&D and front-end production capacity, but energy and land constraints driven by AI have put pressure on expansion at existing bases. While this strategy ensures significant acceleration of Yongin, it also restructures industrial space outward: Seoul focuses on high-end R&D, Chungcheong takes on advanced packaging (HBM) and data centers, Gwangju takes on foundry and memory front-end manufacturing, and Yeongnam hosts the physical AI ecosystem, forming a new "four-region linkage" pattern.

In semiconductors, Samsung Electronics and SK Hynix, based on the existing Yongin industrial cluster (a total of 10 advanced process fabs), will each invest in building at least two additional front-end fabs in Gwangju. The Minister of Trade, Industry and Energy of South Korea announced that the government will accelerate approval procedures to help both companies advance the production time of the current Yongin cluster by about 7 and 12 years respectively, to around 2035.

Southwest South Korea Memory Chip New Cluster

The core of this investment plan is to build a new memory chip cluster in southwestern South Korea, with an investment of about 800 trillion won (about $518 billion), targeting double DRAM capacity within five years. Samsung and SK Hynix will each build two fabs, with the government providing infrastructure such as land, electricity, and water.

At the same time, on June 29, Samsung separately announced a longer-term domestic investment plan: from 2026 to 2040, a cumulative investment of 2,450 trillion won in South Korea, of which about 2,100 trillion won is for semiconductors, accounting for 76%.

Goldman Sachs analyst Giuni Lee's team broke this down:

• 1,650 trillion won for existing fabs and ongoing projects, including advancing the completion of Yongin Fab 6 from 2047 to 2040;

• 400 trillion won for two new fabs in Gwangju, the core part of the southwest cluster;

• 56 trillion won for a new HBM fab in Chungcheong Province.

Goldman Sachs believes that assuming Samsung's domestic capital expenditure and R&D together account for about 80% of the consolidated total, and using an average annual growth rate of about 6%, the cumulative domestic spending from 2026 to 2040 is about 2,500 trillion won, which is roughly in line with the official announcement. Goldman Sachs concludes that "this implied spending growth rate is not aggressive."

Capacity Doubles, but Actual Growth Is Much Milder Than the Numbers Suggest

South Korean memory manufacturers reiterated their goal of nearly doubling DRAM wafer capacity by 2030, but BofA Securities analyst Simon Woo's team poured cold water on that in a report issued on June 29-30.

Doubling sounds aggressive, but the corresponding compound annual growth rate is only about 15%. More critically, when factoring in the closure of older fabs and the longer manufacturing cycles for next-generation memory chips, the actual growth rate of wafers in operation will be below 10%, with net wafer growth reaching only single-digit percentage CAGR by 2030.

BofA Securities also noted that the new southwest cluster is far from the Seoul metropolitan area, requiring a greater scale of infrastructure investment and significantly higher construction difficulty compared to existing bases like Pyeongtaek and Yongin. The institution compares it to TSMC's decentralized layout strategy in Tainan, arguing that such capacity expansion away from core areas requires a longer preparatory period.

Taking into account infrastructure construction (at least 5 years) and fab shell construction plus capacity ramping (an additional 3-4 years), BofA Securities judges that the fastest time for the new cluster to achieve meaningful volume production will be 8 to 10 years later.

Huatai Research also holds a similar view: the total investment of $1.3 trillion includes non-semiconductor sectors such as AI data centers, displays, batteries, and robotics. Within semiconductors, it also includes infrastructure investment in land, factories, power grids, and industrial water. The actual proportion that falls on front-end semiconductor equipment (WFE) like lithography machines is expected to be significantly lower than the conventional industry standard of about 70% equipment in semiconductor CAPEX. Combined with the ten-year investment cycle and natural adjustments from constraints such as electricity, water, and talent, supply and demand are likely to move toward healthy control.

Chinese Equipment Companies: Benefiting from South Korean Layout, Structural Opportunities Emerge

Huatai Research specifically named Chinese semiconductor equipment companies in its investment recommendations. Cleaning equipment manufacturer ACM Research (Shanghai) and thermal processing equipment manufacturer YiTang Semiconductor have business layouts in South Korea and are expected to continue benefiting from this round of memory capacity expansion in South Korea.

Huatai Research believes that under the high prosperity of AI, the expansion of advanced processes, HBM, and advanced packaging capacity will bring sustained incremental equipment demand. Equipment manufacturers may see long-term structural benefits from this decade-long investment cycle. This batch of "four-region linkage" political capacity, combined with the acceleration of Yongin, may systematically expand South Korea's domestic advanced process, memory, and packaging capacity, and affect the release rhythm of related global capacity after 2028, potentially bringing forward related equipment demand.

Next Key Milestone: July Earnings Season

For the semiconductor equipment sector, the next key milestone is the July earnings season.

ASML is scheduled to report earnings on July 15, with TSMC following on July 16.

Investors will then focus on the latest guidance from both companies on capital expenditure for new fabs, which will directly affect equipment demand expectations.

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