South Korean tech giants Samsung Electronics and SK Hynix announced Monday that they will invest a combined 800 trillion won (about $518 billion) to build a new chipmaking hub in the country’s southwest, positioning the expansion to meet rapidly growing demand tied to artificial intelligence.

The plan aligns with government efforts to boost investment beyond the greater Seoul metropolitan area, where South Korea’s semiconductor industry is concentrated. The southwest has historically lagged other industrial regions and is also a political base for President Lee Jae Myung’s liberal Democratic Party.

Samsung and SK Hynix—together producing about two-thirds of the world’s memory chips—said each will build two fabrication plants in the southwest. The companies will expand beyond their existing manufacturing complexes in Gyeonggi Province, south of Seoul.

Samsung’s chairman said the new fabs will be built in the southwestern city of Gwangju, where potential sites have included the grounds of a military air base slated for relocation.

SK Hynix’s chairman said such a large-scale project requires “vast sites,” as well as sufficient power, water, and skilled workers. He noted that it took nine years for SK Hynix to establish its major manufacturing cluster in Gyeonggi Province, underscoring the long lead time needed for major semiconductor capacity.

Government officials dismissed questions about whether the southwest has enough power and water, saying the region’s renewable energy strength could offer an advantage as chipmakers face growing global pressure to rely on cleaner electricity sources.

The investment comes as both companies report record profits, driven by soaring global spending on data centers and AI infrastructure, which increases demand for memory chips. Officials and experts expect AI-driven chip demand to keep rising as the technology spreads to AI-powered industrial robots and autonomous vehicles.

At Monday’s announcement, officials also outlined a broader “nationwide semiconductor ecosystem” plan: expanding manufacturing of chip components and materials in established hubs in the southeast, focusing chip packaging in central Chungcheong, and building data centers across the country—framing semiconductors, physical AI, and AI data centers as “three pillars” of South Korea’s next major step forward.