Inside the $720 Billion Memory Factory Race Fuelling the AI Boom
South Korea's SK Hynix controls more than half the world's most sought-after AI memory chips. Now it is building the largest network of memory factories ever attempted, and every Big Tech CEO wants a seat at the table.
Key points
- SK Hynix is spending $720 billion to build the world's largest network of memory chip factories, mainly in South Korea.
- The company controlled 58% of the high-bandwidth memory market in Q1 2025, according to Counterpoint Research.
- SK Hynix raised $26.5 billion in July by listing shares on the Nasdaq, the largest U.S. listing by a foreign company in history.
- Nvidia signed a $500 billion deal with SK Group that includes co-developing next-generation memory chips and building new data centres by 2027.
- A Chinese rival, CXMT, is scaling fast, and one analyst calls that race "more dangerous than anything else in the world."
Jensen Huang, CEO of Nvidia, the company that makes the chips powering most of the world's AI systems, sent SK Hynix a message on a silicon wafer. It said: "Please make more."
That note tells you everything about the current state of the AI hardware crunch.
What exactly is SK Hynix building?
SK Hynix is constructing the largest network of memory chip factories ever attempted, at a total cost of $720 billion, mostly across South Korea's mountainous terrain. The centrepiece is the Yongin Cluster, a site near Seoul where the first factory alone will stand as tall as a 50-storey apartment building.
CNBC got the first on-camera tour of that site in July 2026. The walls were only halfway up when cameras visited, yet the structure already dwarfs the flat, sprawling chip plants being built in Arizona by Taiwan Semiconductor Manufacturing Co. and Intel.
The reason for building tall rather than wide is space. South Korea is mountainous, so factories stack their cleanrooms, the ultra-sterile rooms where chips are made, across multiple floors instead of spreading them across a single storey.
Why does AI need this specific type of memory?
The chips being made here are called HBM, high-bandwidth memory. Think of ordinary computer memory as a single-lane road; HBM is a 16-lane motorway that moves data to AI processors at extraordinary speed.
HBM is made by stacking layers of standard DRAM, the common memory in your laptop or phone, on top of each other and wiring them together. That stacking process uses so much DRAM that consumer electronics makers are struggling to get enough for phones and computers, because AI companies are signing contracts years longer than the short-term deals memory makers once relied on.
SK Group chairman Chey Tae-won put it simply in an interview in Seoul: "It's like a war. Everybody wants to buy the memory chips. Without that, they cannot produce their AI computing and AI chips."
Who else is in the race?
Three companies dominate the HBM market right now.
| Company | HBM Market Share (Q1 2025) | Key expansion |
|---|---|---|
| SK Hynix | 58% | $720 bn South Korea cluster + $4 bn Indiana plant |
| Samsung | 21% | Multiple new megafabs, backed by South Korean government plan |
| Micron (U.S.) | 21% | $50 bn Idaho fabs + $100 bn New York campus |
Hotels near Samsung and SK Hynix factories are fully booked, according to Counterpoint Research director MS Hwang, because "if you name any company in Big Tech, they are all in Korea to sign a contract."
And then there is China. CXMT, a Chinese memory maker, just made a splashy debut on the Shanghai stock market and is building its own HBM capacity. U.S. export controls stop SK Hynix from selling its best chips in China, but China is catching up with domestic alternatives. Hwang called that competition "a lot more dangerous than anything else in the world."
What does this mean for ordinary people?
In the short term, the memory shortage keeps AI services expensive to run, and that cost filters through to consumers. Longer term, this wave of factory building, if it succeeds, should ease the bottleneck and push prices down.
For investors who bought SK Hynix shares at its Nasdaq listing in July 2026, it has already been a rough ride. Shares peaked near $195 on July 14 then fell roughly 21% to $154.41 by late July, pulled down by wider jitters around AI chip stocks. The company's market cap still tops $1 trillion.
SK Hynix is also building its first U.S. factory, a $4 billion packaging plant in West Lafayette, Indiana, due to finish in 2028. That plant will stack and wire chips together rather than manufacture them from scratch. Tae-won said the company has been scouting sites for a full U.S. manufacturing facility for over a month but has not yet chosen a location.
The next technological step is custom HBM, memory designed alongside a specific AI processor from the ground up. That shift, accelerating with the coming HBM5 generation, is where SK Hynix is placing its biggest long-term bet.
