Samsung, SK Hynix spurn South Korea's $23bn power prepayment plan

Samsung Electronics and SK Hynix have declined South Korea's Korea Electric Power Corporation's proposal to make substantial advance payments for power supplies, according to officials familiar with the matter. The two companies, which together dominate the global memory chip sector, raised concerns about the durability of semiconductor demand over the extended period covered by the arrangement.

The rejected prepayment scheme would have required the chipmakers to commit to significant upfront payments to KEPCO in exchange for guaranteed electricity supply. Such arrangements are typically used by utilities to secure long-term funding, but the semiconductor industry's cyclical nature made the companies reluctant to lock in long-term financial commitments.

The decision reflects broader uncertainty across the chip sector regarding demand trajectories following recent cycles of overproduction and pricing pressures. Both Samsung and SK Hynix have faced margin pressures amid fluctuating memory chip prices and shifting market conditions.

The rejection underscores tensions between South Korea's push to secure investment in its semiconductor infrastructure and the industry's cautious outlook on future business conditions. KEPCO has not disclosed alternative plans to address the proposal's failure, leaving questions about how the utility will finance its power supply commitments to the major industrial users.