Samsung Electronics and SK Hynix have rejected a proposal from South Korea’s state-run Korea Electric Power Corp. (KEPCO) to make a combined upfront payment of 25 trillion won, or about $18.7 billion, to help finance electricity infrastructure for the country’s expanding semiconductor industry.
The decision, reported by Reuters on September 14, was disclosed in a document submitted to a South Korean lawmaker and represents a setback for KEPCO’s efforts to secure funding for major power-grid investments needed to support new semiconductor production clusters.
Under the proposal, Samsung Electronics would have prepaid around 20 trillion won, while SK Hynix would have contributed approximately 5 trillion won. The amounts were based on roughly five years of electricity payments made by the two companies.
KEPCO had sought the advance payments as part of efforts to accelerate construction of transmission lines and substations needed to supply electricity to large semiconductor facilities. The planned infrastructure includes projects supporting the Yongin semiconductor cluster, one of South Korea’s major industrial development initiatives.
However, both chipmakers concluded that paying several years of electricity costs in advance would place too large a burden on their finances and could limit flexibility for future investments. Despite strong demand for memory chips and improved earnings, the semiconductor industry remains highly cyclical, making long-term cash commitments difficult to predict.
KEPCO’s proposal was also intended to reduce its reliance on borrowing and corporate bonds to finance the large-scale expansion of the national electricity grid. With Samsung and SK Hynix declining the plan, the utility will now have to consider alternative sources of funding.
The financing challenge highlights the growing pressure on South Korea’s power infrastructure as semiconductor manufacturers and artificial-intelligence facilities require increasingly large amounts of electricity.
The country is investing heavily in semiconductor mega clusters as it seeks to strengthen its position in the global chip industry. However, providing reliable power to these developments requires substantial spending on transmission networks, substations and other infrastructure.
The rejection by Samsung and SK Hynix underscores the financial tensions surrounding that expansion. While the companies remain central to South Korea’s industrial strategy, they appear unwilling to shoulder a large portion of the infrastructure costs through a multiyear electricity prepayment.
For KEPCO, the decision could increase pressure to raise additional capital through borrowing, electricity pricing or other financing mechanisms as it works to keep pace with the country’s growing energy demand.
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