Global Market: Samsung, SK Hynix Reject $18.7 Billion Upfront Power Payment Proposal

Samsung Electronics and SK Hynix have rejected a proposal from South Korea's state-run Korea Electric Power Corp (KEPCO) to make a 25 trillion won ($18.7 billion) upfront payment to support electricity infrastructure for the country's planned semiconductor mega clusters, according to a document shared with Reuters on Monday, September 14.

What KEPCO Was Proposing

According to the document, submitted to lawmaker Lee Chul-gyu and shared with Reuters, KEPCO proposed that the two chipmakers prepay electricity charges expected to be consumed by their new chip fabrication plants over a five-year period. The upfront funds would let the utility company accelerate construction of the transmission and substation networks needed to power new facilities, including the Yongin semiconductor cluster currently under construction. Under the specific split proposed, Samsung would prepay roughly 20 trillion won and SK Hynix about 5 trillion won.

How the Repayment Structure Would Have Worked

KEPCO also proposed paying interest above the yield on two-year government bonds on the prepaid amount, with the principal and interest to be deducted from the companies' regular electricity bills every six months going forward. In effect, the structure would have had the chipmakers lend KEPCO money upfront and recoup it gradually through reduced future power bills — a financing arrangement that would have shifted some of the utility's infrastructure investment risk onto the chipmakers themselves.

Why Samsung and SK Hynix Said No

Both companies told KEPCO the proposal would be difficult to accept following internal reviews. A company official in Seoul, speaking to Reuters on condition of anonymity given the sensitivity of the matter, said the companies were unsure whether such large upfront payments were necessary, citing uncertainty over the long-term durability of semiconductor demand. Korea JoongAng Daily's reporting added further detail: while the current memory chip boom has significantly improved both companies' earnings and cash generation, they concluded it would be risky to lock up funds on the assumption that the current upturn will last a full five years. Both companies also cited the need to preserve capital for medium- to long-term investments, such as factory expansions and R&D spending.

A Complicating Factor: Currency Pressure on Earnings

Adding to the caution, both companies are already facing downward earnings pressure from currency movements. Citigroup recently cut its third-quarter operating profit forecast for Samsung Electronics by about 10%, from 115.5 trillion won to 104.1 trillion won, citing the burden of a strengthening Korean won. Citigroup similarly lowered its forecast for SK Hynix by about 3%, from 76.7 trillion won to 74 trillion won — a backdrop that likely reinforced both companies' reluctance to commit tens of trillions of won to a long-term prepayment structure.

KEPCO's Financial Position

The rejection comes as KEPCO itself carries a substantial debt load — the utility's total debt stood at 210.7 trillion won as of recent reporting — a financial position that likely factored into its push to secure upfront capital from major industrial customers rather than financing the grid expansion entirely through its own borrowing.

KEPCO's Confirmation

A KEPCO official confirmed the rejection to Seoul Economic Daily: "It is true that Samsung Electronics and SK hynix communicated their refusal of our proposal." Both chipmakers declined to comment publicly when contacted by Reuters.

The Bigger Picture: Powering South Korea's Chip Ambitions

The dispute highlights the enormous infrastructure demands tied to South Korea's push to expand its semiconductor manufacturing capacity. Advanced chip fabrication plants consume substantial amounts of electricity, and reliable power generation and transmission infrastructure is critical to supporting the large-scale semiconductor clusters South Korea is counting on to strengthen its position amid surging global demand for AI chips and high-bandwidth memory.

What This Doesn't Mean

Despite rejecting the specific prepayment structure, reporting indicates both companies agreed with KEPCO's underlying goal of accelerating power infrastructure development — their objection centered specifically on the size and timing of the proposed upfront commitment, not on the broader need for expanded grid capacity to support their chip cluster ambitions.

What's Next

With the prepayment proposal now rejected, KEPCO will likely need to explore alternative financing structures — potentially involving smaller upfront commitments, government support, or standard debt issuance — to fund the power infrastructure needed for South Korea's planned semiconductor mega clusters. For continuing coverage, see the full Reuters report.