[Kangkook Lee's column] To succeed in the three major mega-projects, answers must be found to 'three questions'

Dr. Kangkook Lee is Professor of College of Economics at Ritsumeikan University in Japan and Affiliated Research Fellow at CUKPE

4,755 trillion won is the total amount that Samsung Electronics and SK Hynix announced they would invest by 2035 as part of the Lee Jae-myung administration's "Three Mega Projects for a Great Leap Forward" on June 29. While this figure represents the sum of the two companies' existing investment projects, the amount announced by the government, based primarily on new investment projects, also reaches approximately 1,461 trillion won. Considering that the nominal gross domestic product for 2025 is projected to be 2,663 trillion won, this is a massive sum.

Looking back, that day may well mark a milestone in the history of the Korean economy. This is because it was the day the government announced a vision for a bold industrial policy aimed at fostering growth and propeling the economy forward by establishing Korea as a key hub in the global artificial intelligence (AI) supply chain. The three major mega-projects can be seen as a declaration that Korea, having achieved rapid growth as a developmental state in the past, intends to stand tall as an advanced industrial nation. This is undoubtedly something to be welcomed. Nevertheless, there are important questions that we must ask.

The Significance and Background of the Lee Jae-myung Administration's Three Major Mega-Projects

The "Three Major Mega-Projects " is a future growth strategy aimed at intensively fostering semiconductors, physical AI, and AI data centers as new growth engines in response to the AI ​​revolution. In the semiconductor sector, Samsung Electronics and SK Hynix will invest a total of 800 trillion won to build memory semiconductor fabs in the Southwest region and establish a semiconductor back-end processing base in the Chungcheong region. The Southeast and Daegu-Gyeongbuk regions will be developed as hubs for the semiconductor materials, components, and equipment industries. For physical AI, the goal is to become one of the top three global players by expanding robot production bases in Saemangeum and the Daegu-Gyeongbuk region and training 10,000 specialized personnel in AI robots. In the AI ​​data center sector, companies such as SK, GS, and Naver will invest 550 trillion won by 2029 to build 8.4 gigawatts (GW) of capacity in Ulsan, Donghae, and Sejong, with an additional 10 GW to be constructed thereafter. The investors are Samsung Electronics and SK Hynix, with Samsung Electronics planning to invest 2,655 trillion won, including its existing investments in the Pyeongtaek and Yongin semiconductor clusters, and SK Hynix planning to invest 2,100 trillion won, including its investment in the Yongin fab.

Then, what is the role of the state? It is to actively provide infrastructure, such as electricity, water, locations, and manpower, to facilitate investment by semiconductor companies. The government has presented a vision of an "Electric Nation" that guarantees power supply centered on renewable energy and nuclear power plants for the three major mega-project industries. It also announced plans to create "Corporate High-Tech Cities" to rapidly support large-scale regional investments by companies. Furthermore, the government decided to establish a Future Response Fund based on the additional tax revenue expected from the semiconductor boom , and to invest in future industries, youth, regional areas, and education.

Of course, companies have stated through public disclosures that their investment plans may change depending on future market conditions or shifts in the business environment. Given that mega-project investment plans proceed over a long period, questions are also being raised as to whether they will continue as planned even after a change in government.

Nevertheless, considering the scale of investment and geographical scope, this project can be regarded as a groundbreaking government industrial policy comparable to the heavy and chemical industrialization of the 1970s. Industrial policy is a measure in which the government intervenes in the economy through subsidies, taxation, trade and investment policies, and corporate regulations to lay the foundation for economic growth by fostering specific industries. East Asian countries like Korea have previously succeeded in achieving rapid economic development through active industrial policies. However, since the 1980s, as voices opposing state intervention grew louder and globalization, openness, and economic liberalization spread, industrial policies in various countries have significantly weakened. Although the Korean government also made efforts to foster strategic industries through tax breaks and R&D support following the 1997 Asian financial crisis, it did not pursue a comprehensive industrial policy.

However, the world changed in the 2020s. Following pandemics and wars, governments around the world intensified economic intervention, typified by industrial policy, to secure supply chains and ensure economic security against the backdrop of geopolitical conflicts and a retreat from globalization. The Biden administration in the U.S. led this change by enacting the Semiconductor and Science Act and the Inflation Reduction Act to foster the semiconductor and green industries. The European Union (EU) and Japan have also recently been actively implementing industrial policies. The number of industrial policy interventions worldwide increased significantly, rising from 34 in 2010 to 228 in 2017 and 1,568 in 2022. Now, unlike in the past, research emphasizing the effectiveness of industrial policy is rapidly advancing within the field of economics. The Lee Jae-myung administration's industrial policy is also grounded in this shift in the global economic order, represented by the return of the state.

Another contributing factor is that the rapid advancement of AI technology, often referred to as the "AI revolution," is shifting the paradigms of the economy and industry. Against the backdrop of projections that AI will boost productivity and stimulate economic growth, nations are fiercely competing to secure an advantage in the AI ​​ecosystem. The government, in its report on the three major mega-projects, also states that AI is currently changing the paradigms of growth and industry and presents an opportunity to reverse the continuous decline in potential growth rates. In particular, Korea has seen increased investment capacity from both companies and the government due to the semiconductor supercycle and excess tax revenues, and possesses competitiveness in key elements of the AI ​​ecosystem, such as semiconductor and manufacturing capabilities. In the government's three major mega-projects, semiconductors provide the memory necessary for AI computation, data centers perform large-scale computations, and Physical AI implements AI in industrial settings through robots.

In this regard, Kim Yong-beom, Chief of the Presidential Policy Office, recently presented the concept of an " AI production revolution " on Facebook. He argues that a nation's success in the AI ​​era depends on how quickly it can acquire AI-related production capabilities and translate them into economic growth. To this end, he believes the government must play a role in rapidly building production infrastructure, reproducing production capacity, and connecting the fruits of production back to production. Furthermore, he emphasizes the role of the state not only in organizing production relations—such as coordinating long-term investments and fostering the careers and skills of young people—but also in creating initial demand and organizing the market. Based on this perspective, the Lee Jae-myung administration is pursuing three major mega-projects grounded in active state intervention on the supply side, unlike in the past.

Questions to be posed to the three major mega-projects

Although these three major mega-projects are of great significance, a few questions remain. 

First, isn't the focus of industrial policy heavily skewed toward the AI ​​industry?  While the National Growth Fund certainly targets 12 diverse high-tech strategic industries, including biotechnology and secondary batteries, the core of the current government's industrial policy still appears to be centered on AI-related industries. This reflects the government's strong "AI optimism," but it carries the potential for entailing risks. This is because, as recently warned by the Bank for International Settlements , excessive investment is being made in the AI ​​sector on a scale far larger than has historically been seen in other emerging technology fields.

This suggests that, much like the past "boom-bust" cycles of new technologies, the current semiconductor supply shortage could turn into an oversupply and cause investment to plummet if demand slows in the future. In fact, Big Tech companies currently building data centers—so-called hyperscalers—are seeing their free cash flow shrink rapidly due to massive investments. However, as recently reported by The Economist,  revenues from AI service companies such as Antropic are not growing fast enough to justify this increase in investment.

Meanwhile, concerns are being raised about the potential for severe financial vulnerability as circular finance has recently spread within this sector. For instance, Nvidia invests heavily in OpenAI, and OpenAI uses that money to purchase Nvidia chips. Consequently, there are concerns in the stock market regarding an AI bubble, and if it were to burst, it would have a significant negative impact on investment and consumption. In this scenario, the Korean economy, which is highly dependent on the semiconductor industry, could suffer a major shock. The three major mega-projects, which are almost entirely focused on the AI ​​sector, differ significantly from the government's previous approach. President Lee Jae-myung's presidential campaign pledges presented the so-called "ABCDE Strategy," encompassing AI, biotechnology, content, the defense industry, energy, and manufacturing. The Economic Growth Strategy announced in August 2025 also presented a more diverse industrial portfolio, including the selection of 30 leading projects. Given the reality where semiconductors account for a significantly high 42% of exports, efforts are required to develop other industries in a balanced manner.

Second, isn't there a possibility that the direction of the three major mega-projects conflicts with another important goal: responding to the climate crisis? As is well known, Korea's per capita greenhouse gas emissions are internationally high, while the share of renewable energy generation is significantly low. For this reason, Korea is sometimes referred to as a "climate villain" nation. The 11th Basic Plan for Electricity Supply and Demand, announced in February 2025, stated that to reduce greenhouse gas emissions, the share of renewable energy, such as solar and wind power, in power generation would be increased from 8.4% in 2023 to 29.2% in 2038; however, the reality is that much effort is still required. Nevertheless, the government announced plans to build AI data centers with a total capacity of 18.4 GW by 2035 and to establish four semiconductor fabs with a capacity of 6.3 GW in the Southwest Semiconductor Cluster. This requires a massive amount of additional electricity. Specifically, estimates suggest that by 2035 alone, this will generate an additional annual electricity demand of 169.5 TWh, equivalent to approximately 24% of the total. However, this demand is not reflected in the existing Basic Plan for Electricity Supply and Demand.

Ultimately, unless renewable energy generation facilities are drastically increased, the three major mega-projects could boost greenhouse gas emissions, making it difficult to achieve Korea's Nationally Determined Contribution (NDC). According to the Green Transition Institute , even under an optimistic scenario aligned with the existing NDC, the three mega-projects are estimated to generate approximately 21.45 million additional tons of greenhouse gases annually between 2030 and 2035. To offset these additional emissions and meet the 2035 NDC target, the remaining greenhouse gas emissions from the power generation sector must be reduced even more than originally planned. Considering this, it is concerning that the Lee Jae-myung administration's industrial policy lacks efforts such as the Green New Deal to address the climate crisis.

Third, the most important question is whether the three major mega-projects, which represent AI-centered industrial policies, can truly share the fruits of growth with all citizens. Although the growth rate rose due to a rapid increase in semiconductor exports in the first half of 2026, it is difficult to view this effect as spreading to the entire economy. Rather, there are concerns that the current boom may deepen the gap between export-oriented semiconductor companies and other industries dependent on domestic demand, potentially exacerbating K-shaped polarization. Even if the three major mega-projects succeed, if the benefits are concentrated among a tiny minority of large corporations and their high-wage, regular workers, it could further intensify social disparities and conflicts. AI-centered industrial policies may also have limited job creation effects. The semiconductor industry is highly capital-intensive; in 2022, the employment multiplier per billion won of final demand was 1.86 people, significantly lower than the 4.85 people for the entire manufacturing sector. The number of employees in the semiconductor industry also accounts for only about 4% of total manufacturing employment.

Meanwhile, the government is reported to have recently proposed the " Mega Special Zone Act, " which the business community has long demanded . This proposal includes provisions to extend the maximum employment period for fixed-term workers from the current two years to four years, expand the industries permitted to employ dispatched workers, and exempt R&D personnel from the 52-hour workweek limit. Such measures raise concerns that the government is introducing labor market deregulation and favoring corporations while excluding labor in the process of pursuing AI-centered industrial policies. While the government emphasizes sharing prosperity through the Future Response Fund and youth education, it is questionable whether this is sufficient. Concrete measures must be presented to share profits from AI-related industries, such as semiconductors, with partner companies and vulnerable workers, to alleviate the dual structure of the labor market, and to address inequality resulting from AI development.

The Lee Jae-myung administration's push for the Three Major Mega-Projects, a strong and proactive industrial policy, is desirable and welcome. However, we must ask whether this industrial policy is too focused on AI, and whether there is a possibility that the Three Major Mega-Projects could exacerbate the climate crisis and the inequality crisis, which are major challenges of our time. Only by finding answers to these questions will the Three Major Mega-Projects be able to truly succeed.

(This article was originally published as a column in Hankyoreh in Korean and translated into English with the help of Google Translate. The views expressed in this article are those of the author(s) and do not necessarily represent the official stance of the center.)