Samsung Electronics and SK Hynix have formally rejected a proposal from Korea Electric Power Corp to prepay five years of electricity bills totaling 25 trillion won, about $18.7 billion. The state-run utility wanted the cash to build grid infrastructure for two planned semiconductor mega clusters. The chipmakers, after internal reviews, told KEPCO it would be difficult to accept.
The refusals are now official. Samsung conveyed its decision through a vice president-level executive on September 9, per Business Korea. SK Hynix reached a similar conclusion. KEPCO confirmed in a written response submitted to the office of Rep. Lee Cheol-gyu of the National Assembly’s Climate, Energy, Environment and Labor Committee that it had received answers indicating participation would be difficult.
The proposal itself had surfaced earlier this month through the Chosun Ilbo, which reported that KEPCO wanted the chipmakers to make advance payments for electricity expected to be consumed by the new fabrication plants, allowing the utility to invest in the transmission infrastructure those plants need. The document shared with Reuters this week by the lawmaker’s office confirms both companies have now answered no.
Why the chipmakers balked
The reasoning is straightforward and, from the companies’ side, hard to argue with. Committing tens of trillions of won upfront against electricity the fabs may or may not consume would lock in cash during a boom whose duration nobody can promise. Industry analysis cited by Business Korea notes that with no guarantee the semiconductor supercycle lasts another five years, a prepayment of that size would burden medium and long-term strategy and financial management. The companies effectively chose minimizing business risk over the benefit of faster grid construction at the Yongin and Honam clusters.
An official in Seoul told Reuters the companies were unsure such large upfront payments were necessary, speaking anonymously because of the sensitivity of the matter. Both companies declined formal comment.
KEPCO’s side of the ledger
KEPCO’s proposal was unusual because the utility’s finances are strained. As of the end of June, KEPCO’s total liabilities stood at 210.7 trillion won, and its daily interest expenses run about 11.5 billion won. Asking its two largest industrial customers to prepay was a way to fund grid expansion without adding debt. The utility holds a near monopoly on power distribution in South Korea and is majority state-owned, which means the rejection lands not just on a company but on a policy assumption: that industry will co-finance the energy buildout its own factories require.
South Korea’s semiconductor expansion is enormous by any measure. SK Hynix’s board approved 54.3 trillion won, about $38 billion, for two new memory fabs, with construction already underway at the Yongin cluster. Samsung is building a new DRAM plant at its Giheung site as AI demand lifts memory prices. Both projects need reliable high-capacity power on a timeline measured in years, and grid capacity in the Yongin region has been flagged by Korean industry planners as a binding constraint on how fast the cluster can grow.
The memory boom behind the standoff
| Item | Figure |
|---|---|
| KEPCO prepayment requested | 25 trillion won ($18.7B) |
| KEPCO total liabilities, June | 210.7 trillion won |
| KEPCO daily interest expense | about 11.5 billion won |
| SK Hynix new fab budget | 54.3 trillion won ($38B) |
| SK Hynix US ADR listing, July | $26.5 billion raised |
| SK Hynix HBM market share | 56.4 percent |
The memory market context explains both sides of the argument. SK Hynix holds 56.4 percent of the HBM market per its SEC filing, supplies Nvidia and Google, and raised $26.5 billion in a Nasdaq ADR listing in July, the largest first-time US listing by a foreign company. Memory prices have climbed hard enough that Apple raised product prices, with Tim Cook telling the Wall Street Journal the situation had become unsustainable. Arm CEO Rene Haas described the industry as in an “absolutely supply-constrained environment” this month, and said memory prices rising has made smartphones more expensive.
Against that backdrop, refusing to prepay five years of power bills looks conservative. But the same executives lived through 2019, when the memory cycle turned and capex committed at the top of a boom sat idle. The Reuters-sourced official’s phrasing about long-term durability of demand captures it: the boom is real, its half-life is unknown.
What happens to the grid now
The rejection does not kill the clusters, but it shifts the funding question back to the state. KEPCO must now finance grid expansion through its own balance sheet, government support, or rate increases, in a country where electricity prices for industry are politically charged. The Yongin cluster is the largest of the projects and has been pitched as a national priority, which raises the odds of some form of government-backed financing package rather than another attempt at customer prepayment.
For now the two chipmakers keep their cash. Samsung is spending heavily on its Taylor, Texas foundry and Giheung DRAM expansion. SK Hynix has $38 billion of fab construction to fund. Neither wants to add an $18.7 billion prepayment to that list on the strength of a demand forecast.
A wider pattern
The standoff fits a pattern that has defined the AI buildout in 2026: the bottlenecks are no longer only chips. Power, grids and who pays for them are moving to the center of the story, from Northern Virginia’s substation queue to Ireland’s grid connection moratorium to Korea’s own electricity pricing fights. Chipmakers that raised tens of billions on Wall Street this summer did so to build fabs, not to finance utilities. KEPCO’s next move, and Seoul’s, will show whether governments accept that split or force it back onto the industry.