SK hynix, the world's second-largest memory chip maker, said Wednesday it will expand the production capacity of next-generation DRAM, including High Bandwidth Memory, which is critical to generative artificial intelligence tools, in response to rapidly increasing demand for AI chips.

The decision came as the board of directors approved the plan during a meeting held later in the day to build the M15X fab in Cheongju, North Chungcheong Province, for a new DRAM production site, according to the company.

With a gradual increase in equipment investment planned, total spending in building the new production base will be more than 20 trillion won ($14.6 billion) in the long term, which will include about 5.3 trillion won for the fab construction.

The memory chip maker said it plans to start construction at the end of April and reach completion in November 2025 for early mass production.

“As a global leader in AI memory, we aim to contribute to revitalizing the national economy by expanding investment in domestic production bases, which are the basis of the company's competitiveness, while raising Korea's status as a semiconductor powerhouse,” an SK hynix official said.

With the advent of the AI era, the chip industry believes that the DRAM market has entered a mid-to-long-term growth phase. Along with HBM, which is expected to grow at an average annual growth rate of more than 60 percent, the company forecasts that demand for general DRAM will ascend on a steady rise, centering on high-capacity DDR5 module products for servers.

With this trend, as HBM requires at least twice as large the capacity to secure the same production volume as general DRAM products, SK hynix decided that increasing DRAM capacity was a prerequisite for future growth.

SK hynix said it decided to produce new DRAM from the M15X fab before the completion of the first fab in the Yongin Semiconductor Cluster in the first half of 2027. The advantage of optimizing HBM production was also considered, as M15X is adjacent to the M15 fab, which is expanding through silicon via capacity, according to the company.

Along with the M15X fab, the company plans to push ahead with other domestic investments as planned, including the Yongin Semiconductor Cluster where it will inject approximately 120 trillion won.

Currently, the site development progress rate for the cluster in Yongin, Gyeonggi Province, is at approximately 26 percent, with construction progressing 3 percent faster than the target.

All compensation procedures and cultural property surveys for the site where SK hynix's production facility will be built have been completed, and the construction of infrastructure such as power, water and roads is also progressing faster than planned. The company plans to start construction of the first fab in Yongin in March next year and complete it in May 2027.

For the broader SK Group, investment by SK hynix is a main pillar when it comes to overall domestic investments. Since its incorporation into SK Group in 2012, SK hynix has invested an accumulated 46 trillion won since 2014 to build three new fabs -- M14 in Icheon, Gyeonggi Province, M15 in Cheongju in 2018 and M16 in Icheon in 2021 -- in Korea through its "Future Vision" initiative.

“With the transformation into a key facility that supplies AI memory to the world, M15X will play a pivotal role as a stepping-stone connecting the company’s present and future,” said Kwak Noh-Jung, president and CEO of SK hynix. “We are confident that this investment will be a giant leap that goes beyond the private sector for contribution to the future of the broader domestic economy.”