South Korean President Lee Jae-myung has ordered the temporary relocation of all functions at Gwangju Military Airport by mid-2028 to clear land for the Honam semiconductor industrial cluster in Jeolla, tying military infrastructure directly to his administration’s chip and AI buildout.
Lee gave the instruction on Aug. 10, 2026, during the second public-private inspection meeting for the country’s "three super projects" at the Blue House. He told the Defense Ministry that a war of speed was no longer enough and said the effort had to be fought as a "lightning war."
The order came as Lee’s approval rating fell to 43.3%, the lowest point since he took office, with support down for a fourth straight week. The report frames the moment as a choice between political pressure and a full-force bet on AI chips, with Lee choosing the latter.
An industrial plan built around chips, physical AI, and data centers
Lee’s targets are explicit. He wants semiconductors, physical AI, and AI data centers to serve as the three pillars of the country’s next industrial push. Within five years, South Korea aims to double its DRAM production capacity. Samsung Electronics and SK Hynix are each expected to add two new fabrication plants, with total investment of about KRW 800 trillion.
The government also plans to invest more than KRW 1,000 trillion in AI data centers by 2035. Separately, it has set out KRW 81 trillion for an advanced chip packaging cluster in the Chungcheong region.
In that strategy, the Gwangju airport relocation stands out as the most symbolic move. Lee explicitly called for a pace comparable to Japan’s Kumamoto model, saying the Honam semiconductor cluster should move no slower than Kumamoto. The report notes that Taiwan Semiconductor Manufacturing Co.’s benchmark project in Kumamoto went from groundbreaking to production in about two years.
Lee also said that "the prologue to Korea’s golden age has begun" and called the coming year a golden window that requires an all-out push.
Political strain and industrial mobilization are unfolding at the same time
The report describes Lee’s current position as two parallel tracks.
On one track, he is mobilizing military resources to free land for fabs, drawing in Samsung and SK Hynix, sketching out an investment blueprint worth many quadrillions of won over the next decade, and pressing the government to respond to an extraordinary situation with extraordinary force. AI, in this telling, is not a routine industrial policy priority but a time-sensitive national campaign.
On the other track, his administration is dealing with controversy over property tax reform, fallout from a bill tied to prosecutorial powers, an extended heat wave, and broader policy and public-opinion pressure. Those factors have coincided with his approval rating slipping to 43.3% over four consecutive weeks.
At the meeting, Lee tried to broaden the AI and semiconductor narrative beyond large companies and the Seoul area. He said the end goal of the super projects was not to concentrate gains in a few firms or regions, but to extend the axis of growth nationwide and redraw the map of advanced industry around local regions. He also called for early preparations to guard against K-shaped growth and said excess tax revenue generated in the AI era would be placed into a new future response fund for young people, regional development, and growth engines.
Yet the report places that promise next to a harder market reality: 1.2 million accounts have already reached margin-call territory.
The AI trade drove a spectacular rally in Korean equities
While Lee was talking about a golden era, ordinary Korean investors were living through a very different version of the AI story.
In the first half of the year, the KOSPI surged from 4,300 to 9,385, a gain of 116%, leading global markets. The investment case looked clean and powerful. AI was driving explosive demand for computing power. High-bandwidth memory, or HBM, was seen as the bottleneck, and only three companies in the world were able to mass-produce it. Two of them were South Korean: Samsung and SK Hynix.
That narrative pulled retail money into the market. The South Korean government approved 2x leveraged ETFs linked to Samsung and SK Hynix, and retail investors rushed in. Assets under management in those products jumped from KRW 5 trillion to KRW 76 trillion in two months. Leveraged products took the top 12 spots in first-half performance rankings, and the best performer was up 764% over the period.
One widely shared social-media anecdote captured the mood. A young Korean woman told a friend that it was the best summer of her adult life. She had just found a job, put all of her wages into the stock market, and made five years’ worth of salary. She said the experience gave her the illusion of a golden age for humanity. The report makes a point of that last word: illusion.
July’s selloff pushed the KOSPI into a bear market and triggered circuit breakers
The reversal hit in mid-to-late July.
On July 16, the KOSPI fell below 6,800 intraday, entering a technical bear market. On the same day, the Bank of Korea announced a 25-basis-point rate hike during the selloff.
Then came "Black Tuesday" on July 28. The KOSPI fell more than 10% in a single day and dropped below 6,000. Samsung lost more than 13%, SK Hynix fell more than 14%, and trading curbs were triggered. On July 29, the index fell nearly another 6% to close at 5,663, marking two straight sessions with circuit breakers. From the peak at 9,385 to 5,663, the benchmark had fallen exactly 40%.
The report says the mechanism of 2x leveraged ETFs turned into a meat grinder in a falling market. When the underlying shares dropped, the funds had to cut positions mechanically to maintain their leverage ratio. Those sales then accelerated the decline.
Citigroup estimates KRW 56.3 trillion in retail losses
According to calculations cited from Citigroup analysts, cumulative losses suffered by South Korean retail investors in leveraged ETFs have reached about KRW 56.3 trillion, equivalent to $38.7 billion.
More than 1.2 million leveraged accounts have touched the margin-call line, the report says, and roughly 350,000 to 460,000 accounts have been forcibly liquidated by brokerages, wiping out principal. In a country of 50 million people, that works out to about one person facing a blow-up for every 30 adults. Among those who were forced out, investors in their 20s and 30s accounted for 62%.
The report includes several accounts from retail traders. One post on an anonymous Korean workplace forum read: "I had made KRW 600 million, and now I’m down KRW 700 million in total." Another said: "My wedding money was all in there, and I lost 40%."
A 45-year-old office worker identified only by the surname Kim put in KRW 34 million after averaging down five times and is now sitting on a paper loss of more than half. A 60-year-old investor, Song Mi-kyung, had been up KRW 300 million in the first half but is now down more than 60%. She said she had never seen a decline happen this fast, not even during the Asian financial crisis.
Another retail investor left a message on a Korean brokerage forum: "My life is over. I can’t think of any way out."
The report’s contrast is blunt. Lee’s AI campaign is a wager on South Korea’s industrial structure for the next 20 to 30 years. But in this summer’s market rout, the first people swept up by the country’s proclaimed AI golden age were the 360,000 ordinary accounts that had already been forcibly liquidated and will not be there for any rebound.