Samsung Electronics and SK Hynix rejected a 25 trillion won ($18.7 billion) upfront payment proposal from Korea Electric Power Corp. for power infrastructure tied to planned semiconductor mega clusters, citing uncertainty over long-term demand.
KEPCO, the state-run utility, had sought the advance payment to fund grid expansion for new chip fabrication plants. Both chipmakers declined after internal review, with a company official in Seoul saying the firms were unsure whether such large upfront commitments were necessary.
The rejection underscores a critical tension in South Korea's chip expansion strategy: massive capital intensity meets cyclical demand risk. An $18.7 billion prepayment locks in spending regardless of how fab utilization and pricing evolve over the next five to ten years—a bet even the industry's largest players won't take.
KEPCO now must find alternative financing for the power infrastructure backing South Korea's semiconductor ambitions. That financing gap could delay fab construction or force the utility to absorb more of the capital burden itself, pressuring its own balance sheet.
Samsung and SK Hynix declined to comment further on the matter.
