A Tech Hub for Every Region? The Test Facing South Korea

Editor’s note: This op-ed is adapted and expanded from a Korean-language column published in Chosun Ilbo and appears here in English with permission.

South Korea is trying to spread its next generation of high-tech industries across the country, assigning regions roles in semiconductors, batteries, biotechnology, robotics, and other advanced sectors. But designating an industry for a region is easier than creating a successful technology hub: The firms, skilled workers, suppliers, research institutions, infrastructure, and customers that make clusters thrive are not so easily distributed.

The strategy comes from President Lee Jae Myung’s “five poles and three special provinces” plan for regional economic development. The five large economic regions include the Seoul metropolitan area, while the three provinces have separate development plans. In August, the government named three or four priority industries for each of the seven areas outside the capital region. It assigned the central region advanced semiconductors and batteries; the southwest, semiconductor manufacturing and autonomous driving; the Daegu–Gyeongbuk region, chip materials and AI robotics; and the southeast, shipbuilding and aerospace. Each of the three provinces has its own list. AI is meant to apply across all regions.

The plan responds to the concentration of economic activity around Seoul. In 2024, the Seoul metropolitan area, comprising Seoul, Incheon, and Gyeonggi Province, accounted for 52.8 percent of Korea’s combined regional economic output. The government wants stronger economies elsewhere, and plans to support its chosen industries with financing, tax incentives, research funding, university programs, and industrial infrastructure. Local governments are due to prepare detailed plans by the end of the year. The key question is whether that support will be concentrated enough to build viable clusters.

Technology clusters grow through accumulation. Companies seek skilled workers and nearby suppliers. Workers stay where they have a choice of employers. New firms emerge around established ones, and customers give them a reason to improve. An industrial park or research grant can help that process. Spreading both too thinly may never get it started.

The United States has encountered the same problem. ITIF found that awards from four federal technology hub initiatives reached regions in 48 states. Many recipients had promising ideas, but the money was dispersed across too many places to give the strongest candidates the sustained support needed to become self-sustaining hubs. As it turns its map into budgets, Korea can still avoid that outcome.

Multiple related industry initiatives are not, by themselves, evidence of waste. Semiconductor manufacturing in one region and chip materials in another can strengthen the same supply chain. A place on the industrial map should not, by itself, justify substantial public funding. What matters is whether the proposed locations have companies ready to invest, workers they can attract, suppliers able to grow, and customers beyond the region. Projects with those foundations may merit substantial, sustained support. Uncertain ones can begin with smaller demonstrations. The government should have room to expand a successful project and stop funding one that cannot attract private investment or customers.

When Korea’s National Assembly reviews the 2027 budget, it should look beyond the amount assigned to each region. Lawmakers need to know how much each project will receive, for how long, and what must happen before the next round of support. Completing an industrial park says little about whether firms will remain there after public funding ends.

Population decline poses another challenge. Attracting workers from the capital region could strengthen regional cities, but it would not necessarily reverse population decline in their surrounding towns. Statistics Korea’s 2024 data indicate that 15 of Korea’s 17 cities and provinces will have fewer residents in 2052 than in 2022. Policy can change that trajectory, but the government also needs to plan for places where decline continues. For residents there, reliable bus services and connections to regional transport networks may offer more immediate benefits than a proposed technology park, helping them reach jobs, schools, and medical care in nearby cities.

Lee is right to seek stronger economies beyond Seoul. Assigning an advanced industry to every region will not give them equal prospects. Korea should concentrate enough resources in promising hubs to compete globally, while making daily life easier in places that will continue to lose residents. Those hubs can serve surrounding towns if people can reach their jobs, schools, and hospitals. Korea should draw its industrial map in pencil, revising its funding priorities as evidence of private investment and customer demand emerges.