Korean AI Funds Expand Beyond Memory Chips?

Yes, Korean AI investment funds are actively expanding beyond memory chips into the broader semiconductor value chain, though memory remains the core focus. This article explains what this shift entails, why it is happening, and what it means for investors and the industry.

Formula

The calculator splits a given investment amount into two buckets based on percentages. The formula is:

Allocation = Investment Amount × (Percentage / 100)

• Investment amount (t) – total capital to allocate, in KRW million.
• Memory chip share (m) – percentage of the investment going to memory chip companies.
• Other semiconductor share (o) – percentage going to non-memory segments (foundry, equipment, packaging, etc.).

Worked Example

Using the defaults: investment = 100 million KRW, memory share = 60%, other share = 40%.

1. Memory allocation: 100 × (60 / 100) = 60 million KRW
2. Other allocation: 100 × (40 / 100) = 40 million KRW
3. Total: 60 + 40 = 100 million KRW

The calculator returns 60 million KRW for memory, 40 million for other, and 100 million total.

Background: Why Korean AI Funds Are Shifting

South Korea has long dominated the global memory chip market, with companies like Samsung Electronics and SK Hynix leading in DRAM and NAND flash. These chips are essential for AI servers, which require high-bandwidth memory (HBM) to process large datasets. Consequently, early AI investment funds in Korea naturally concentrated on memory chipmakers, riding the wave of AI-driven demand.

However, the AI boom is not limited to memory. AI accelerators (like GPUs), power management chips, advanced packaging, and semiconductor equipment are all critical. As the industry matures, Korean funds are diversifying to capture value across the entire chain. This shift is driven by several factors:

• Supply chain resilience: The 2021–2023 chip shortage highlighted the need for investment in equipment and materials.
• Government policy: South Korea’s “K-Semiconductorâ€� strategy aims to build a comprehensive semiconductor ecosystem, not just memory.
• Valuation concerns: Memory stocks have rallied sharply, prompting some funds to seek undervalued segments.

How Korean AI Funds Are Diversifying

Diversification takes several forms. Some funds now invest in:

• Foundry services: Contract chip manufacturing for AI chips, where Samsung Foundry competes with TSMC.
• Semiconductor equipment: Companies that make lithography, etching, and deposition tools, crucial for advanced nodes.
• Advanced packaging: 2.5D and 3D packaging technologies that enable HBM integration with GPUs.
• Fabless AI chip designers: Korean startups designing NPUs (neural processing units) for on-device AI.
• Materials suppliers: Producers of photoresists, wafers, and specialty gases.

For example, a fund might allocate 40% to memory, 30% to foundry, 20% to equipment, and 10% to packaging. This reduces reliance on any single segment’s cyclicality.

Common Problems and Misconceptions

A common misconception is that diversifying away from memory means abandoning Korea’s strength. In reality, it is about complementing it. Memory still generates the majority of revenue for Korean semiconductor giants, but their growth increasingly depends on foundry and packaging.

Another issue is that non-memory segments are often more volatile. Equipment sales can swing with capital expenditure cycles, and fabless startups carry higher failure risk. Investors must assess whether a fund truly has expertise in these areas or is merely adding names for show.

Liquidity is also a concern. Many non-memory companies are smaller, with thinner trading volumes, making it harder to exit positions quickly.

How to Choose a Diversified AI Fund

When evaluating Korean AI funds that go beyond memory, consider:

1. Check the prospectus: Look for explicit allocation guidelines across sub-sectors.
2. Review holdings: See if the fund holds equipment, packaging, or fabless names, not just Samsung and SK Hynix.
3. Assess management expertise: Does the team have experience in non-memory sectors?
4. Compare fees: Actively managed diversified funds often charge higher fees, which can erode returns.
5. Consider index funds: Some indices track the entire Korean semiconductor value chain, offering broad exposure.

Comparisons: Memory vs. Non-Memory Investments

Aspect	Memory	Non-Memory
Revenue stability	Cyclical but high volume	More diversified but dependent on capex
AI exposure	Direct via HBM	Indirect but essential
Growth potential	Mature, but HBM is growing	High, especially in equipment and packaging
Risk	Price cycles	Tech obsolescence, smaller players

Memory offers immediate AI revenue, while non-memory provides long-term infrastructure plays. A balanced fund might allocate 50–70% to memory and the rest to other segments.

Costs and Practical Considerations

Investing in Korean AI funds carries typical costs: management fees (often 1–2% annually), performance fees, and foreign exchange risk if you invest from outside Korea. Minimum investment amounts vary; some funds require as little as 1 million KRW (about $750), while others set higher thresholds.

Taxes also matter. Korean funds may withhold dividends, and capital gains tax depends on your residency. Always consult a tax advisor.

Safety and Risk Management

Diversification reduces but does not eliminate risk. Semiconductor stocks are sensitive to global economic cycles, export controls, and technological shifts. For example, if AI demand slows, both memory and equipment makers suffer. To manage risk:

• Limit exposure to any single fund or sub-sector.
• Rebalance periodically to maintain your target allocation.
• Stay informed about export regulations and government policies.

Frequently Asked Questions

Are Korean AI funds abandoning memory chips?

No. Memory remains the core, but funds are adding non-memory exposure. The shift is additive, not replacement.

What is the main non-memory area Korean funds target?

Foundry and advanced packaging are the most popular, as they directly support AI chip production. Equipment and materials are also growing.

Can individual investors replicate this diversification?

Yes, by buying a mix of ETFs or individual stocks across the value chain. However, research is needed to pick quality names.

How does HBM fit into this?

HBM is a memory product, but its production requires advanced packaging. Thus, even memory investment now involves non-memory processes.

What are the risks of non-memory investments?

Higher volatility, smaller company liquidity, and dependence on capital spending cycles. These can be mitigated by diversification.

Are there government incentives for such funds?

South Korea offers tax incentives and subsidies for semiconductor R&D and facility investment, which can benefit funds investing in these areas.

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in t | Investment amount | KRW (million) | 100 | 0
in m | Memory chip share | % | 60 | 0
in o | Other semiconductor share | % | 40 | 0
out mem | Allocated to memory | KRW (million) | t * (m / 100) | 0
out oth | Allocated to other | KRW (million) | t * (o / 100) | 0
out total | Total allocated | KRW (million) | mem + oth | 0