[Edaily Reporter Kim Sang-yoon ] The South Korean government’s strategy—aimed at keeping the burden of investment in the U.S. low given that its economy is smaller than Japan’s—is running into trouble. Although South Korea and the U.S. agreed on $350 billion in investment in the U.S.—$200 billion less than Japan’s $550 billion—the scale of individual projects is growing larger than expected as they take shape. The total project cost for the Encinales Gas Combined Cycle Power Plant in Texas—a leading candidate for the first project—has ballooned from the initial $16.8 billion to $22.3 billion. Furthermore, with the U.S. even proposing a plan to invest $120 billion in the construction of eight nuclear power plants, the scale of investment in the U.S. appears to be expanding uncontrollably.
An even bigger variable lies beyond the $350 billion figure. As the U.S. uses semiconductor tariffs as leverage to demand that companies such as SamsungElectronics(005930)and SK hynix(000660) further expand local production, corporate direct investment has emerged as a new variable. Since domestic companies’ independent investments are separate from the $350 billion agreed upon by South Korea and the U.S., if these additional expansions materialize, the total volume of investment in the U.S. borne by the South Korean economy as a whole could grow to “$350 billion + α.” Concerns are emerging that the initial negotiation strategy—which aimed to minimize the economic and foreign exchange market shocks by keeping the burden of investment in the U.S. lower than that of Japan—could be undermined.

◇ Japan has already secured $109 billion… Taiwan bundles investments into a semiconductor package
The total investment in the U.S. that South Korea pledged when it concluded tariff negotiations with the U.S. last year amounts to $350 billion. This consists of $200 billion in strategic investments and $150 billion in shipbuilding cooperation. This is $200 billion less than the $550 billion agreed upon by Japan and the U.S.
At the time, the government emphasized that, given the difference in economic scale between Japan and South Korea, it could not shoulder the same level of investment burden. In particular, it put in place safeguards to mitigate the impact of large-scale dollar outflows on the foreign exchange market, such as limiting the annual funding cap for the $200 billion in strategic investments to $20 billion. The intent was to manage both the total amount of investment in the U.S. and the pace of its execution.
However, the situation is changing as actual projects are being identified. The total project cost for the Encinal Gas Combined Cycle Power Plant—a leading candidate for the first investment project—has risen from $16.8 billion at the time of the initial review to $22.3 billion. This represents an increase of $5.5 billion, or approximately 33 percent. While the $22.3 billion figure does not mean South Korea will bear the entire cost of the project, the fact that the first project has grown larger than expected has made it crucial to assess how well the profitability and risks of individual projects can be controlled.
Subsequent projects are even larger in scale. It is reported that the U.S. side has proposed to South Korea a plan to utilize $120 billion of the $200 billion in strategic investments to construct eight large-scale nuclear power plants in the United States. A simple sum of the total cost of the Encinal project and the U.S. proposal for the nuclear power plants comes to $142.3 billion, exceeding 71% of the $200 billion strategic investment.
Of course, the $120 billion for nuclear power plants is also a U.S. proposal, and South Korea has not yet confirmed that it will accept it as is. This is why the government intends to negotiate by separating the cooperative direction—the construction of eight nuclear power plants—from the specific investment scale. In addition, the U.S. is requesting South Korea’s participation in large-scale energy projects such as CCUS (Carbon Capture, Utilization, and Storage) and Alaska LNG, so the pool of investment candidates is growing steadily for the limited $200 billion.
Unlike South Korea, Japan has entered the actual implementation phase of its $550 billion investment package. So far, six projects totaling approximately $109 billion have been selected across the first and second rounds.
In the first round, projects totaling $36 billion were selected, including a $33.3 billion natural gas power generation facility in Ohio, a $2.1 billion crude oil export infrastructure project in Texas, and a $600 million synthetic diamond production facility in Georgia. Subsequently, in the second round, projects were announced to build small modular reactors (SMRs) worth up to $40 billion in Tennessee and Alabama, as well as gas-fired power plants worth up to $17 billion in Pennsylvania and $16 billion in Texas.
The projects announced in these two rounds alone account for approximately 20% of Japan’s $550 billion package. Japan is currently in discussions with the U.S. regarding a third round of investment projects, and it is expected that AI and semiconductor-related projects will account for a significant portion of this round.
Taiwan’s structure is fundamentally different. The investment framework agreed upon by the U.S. and Taiwan consists of at least $250 billion in new direct investment in the U.S. by Taiwanese semiconductor and technology companies, along with at least $250 billion in credit guarantees from the Taiwanese side. In effect, direct investment by semiconductor, AI, and energy companies was included in the trade negotiation package from the outset.
TSMC’s investment in the U.S. is particularly crucial. At the time of the agreement between Taiwan and the U.S., the $100 billion in additional investment that TSMC had previously announced was included in the $250 billion corporate investment commitment. Since then, TSMC’s U.S. investment plan has expanded to a total of $265 billion, and the Taiwanese government has stated that other companies, excluding TSMC, also plan to invest an additional $20 billion in the U.S.
◇ South Korea’s Semiconductor Investment Stands at Only $350 Billion… Is the “Red Line” Shaking?
South Korea’s situation differs from that of Japan and Taiwan. Although the country has already pledged a massive $350 billion in investment, direct U.S. investments by domestic companies such as SamsungElectronics and SK hynix are proceeding separately from this commitment.
U.S. Secretary of Commerce Howard Rutnick has recently continued to make remarks indicating that companies that do not produce semiconductors in the U.S. will face tariff burdens, putting pressure on them to expand local production. The Blue House also confirmed that the U.S. side has raised the issue of semiconductor investment and that discussions are currently underway between South Korea and the U.S.
Semiconductors may be included among the industries targeted by the $200 billion strategic investment. However, direct investments by SamsungElectronics and SK hynix to build or expand their own factories in the U.S. are separate from the $350 billion figure. If South Korean semiconductor companies decide to undertake additional expansions in response to U.S. demands, the total funds that the South Korean economy as a whole invests in the U.S. will increase by that amount, even if the intergovernmental agreement remains at $350 billion.
This differs from Taiwan, which explicitly included corporate direct investment in semiconductors within its trade negotiation package. Japan, too, has finalized energy and nuclear power projects within a broad framework of $550 billion and is discussing follow-up projects in AI and semiconductors. In contrast, while South Korea has pledged $350 billion, the U.S. demand for local semiconductor production is likely to materialize as separate corporate investments.
A business sector official familiar with the matter stated, “There is a structural contradiction in the fact that the government is considering projects as investment targets—projects that private companies initially declined to participate in because they were difficult to make profitable—while at the same time citing ‘commercial rationality’ as the investment principle,” adding “Given the importance of the U.S. market, companies must make necessary local investments; however, if investments—driven more by tariff reductions or the need to meet U.S. demands rather than profitability—continue to pile up, companies will inevitably have to allocate funds to the U.S. that were not originally part of their business plans, thereby increasing their investment burden,” the source added.