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Companies to invest alongside South Korean government in factories to meet surging demand for memory chips

Samsung Electronics and SK Hynix, the world’s largest makers of memory chips, and the South Korean government plan to invest $590bn in a vast manufacturing expansion as the AI boom exacerbates chip shortages.

The companies and government will invest a combined Won911tn ($590bn) to build chipmaking facilities in under-developed parts of South Korea as part of President Lee Jae Myung’s plan to promote more balanced regional economic development.

The investment pledges are part of the “Three Mega Projects for the Great Leap Forward” initiative announced on Monday and aimed at developing the country’s capabilities in semiconductors, AI data centres and robotics.

“The AI revolution is reshaping the global economic and industrial landscape,” the government said in a statement. “Our competitors are aggressively building semiconductor fabs to meet rapidly growing demand . . . we must respond swiftly to stay ahead.”

About Won800tn will be spent on building four chipmaking plants in the country’s south-western region, while Won81tn will go towards constructing a chip packaging cluster in its central region.

Over the next 15 years, South Korea plans to invest Won30tn to develop next-generation memory chips, on-device AI chips and semiconductors used in defence.

South Korea’s chipmakers are racing to meet surging demand from the data centres that power chatbots and other AI tools. The world’s five largest AI companies are expected to spend more than $1tn in 2025 and 2026 on data centres.

Their demand has raised memory chip prices for other customers, including consumer electronics makers. Last week, Apple raised MacBook and iPad prices, citing the “unsustainable” cost of memory and storage.

Samsung and SK Hynix now have a combined market capitalisation of roughly $2tn.

Together, the two companies account for nearly 80 per cent of the global market for high-bandwidth memory chips, which enable the rapid movement of the massive volumes of data required for AI applications.

Lie-flat seats in private pods face long waits for safety certifications

Dutch airline KLM has been preparing for a new and more-luxe business-class experience, featuring 34 lie-flat seats equipped with privacy doors and 19-inch touch screens.

But there’s a problem. The seats, which the carrier is marketing to high-end fliers on a brand new long-haul jet, haven’t yet been certified by aviation authorities. So when it launches its inaugural flight featuring the seats in September, they will be empty.

Lufthansa has had a similar problem. So does Singapore Airlines. A number of carriers, including United and American, have debuted new business-class suites with their doors locked open, awaiting approval.

Airlines are in an amenities arms race to stand apart and fly passengers in comfort and style. Seats are at the forefront, with private pods kitted out with extra storage space, wireless charging, ottomans and retractable privacy dividers. U.S. and European aviation safety authorities are saying not so fast.

Seats are often the last things installed on a new plane. In some cases, the lengthy process left plane makers with jets they can’t yet deliver to airlines.

“We have airplanes sitting for customers, completely done, waiting for seat certifications,” Boeing Chief Executive Kelly Ortberg said last month.

Everything from seat-belt buckle mechanisms to door latches could change how passengers might evacuate in an emergency, or how they are protected in a crash, Federal Aviation Administration chief Bryan Bedford told reporters last month.

“You don’t usually think of seats as novel technology,” Bedford said. “We see seats, suites, especially in the premium section of the airplane, that just don’t pass our human factors tests for impact.”

The testing isn’t new. But more complex, customized seat designs and new materials are raising new questions for regulators, said Gary Weissel, a consultant who has assisted airlines in developing, certifying and installing new interiors.

When seats are installed at an angle, like the herringbone configuration airlines have used to fit more flatbed seats, passengers can experience different types of injuries in a crash, compared with the forward-facing seats that have populated coach cabins for decades. Roomier pods and other spacious premium seats allow bodies to go flailing in unusual ways.

“Even when we’re changing the placement of the passenger a little bit, even when we’re changing the material to be sleeker looking, we still need to make sure that it meets all of those critical criteria,” said Caitlin Locke, the FAA’s safety chief.

Cabin safety improvements are one reason that passengers can walk away from accidents today that would have been fatal decades ago, Locke said at a conference this month.

Crash tests and dummies

New seats are run through a gantlet of tests to prove that they’re safe for passengers.

They are mounted on sleds and fired down a track to make sure they remain structurally sound when subjected to 16 times the force of gravity. Crash dummies are evaluated for injuries. New lightweight materials must pass flame tests to make sure they won’t ignite and spread fire throughout a cabin.

Coming up with fixes can be time consuming, and delays are costing airlines.

When Lufthansa’s new Boeing 787-9 Dreamliners started flying last year, only four of the 28 business-class seats were available to book, with the rest blocked off. It flew that way until mid-March, after the FAA approved most of them—though three seats in the second row are still blocked.

That set back Lufthansa’s plan to upsell customers on five different seating options within its business-class cabins on the Dreamliner.

Singapore Airlines has pushed back the launch of its first retrofitted Airbus A350-900 long-haul plane to early next year, citing delays in certification of one of the seats, along with industrywide supply-chain constraints.

Even though Air France, KLM’s sister airline, has business-class seats similar to those KLM installed on its Airbus A350, a spokesperson for the European Union Aviation Safety Agency said KLM’s new business-class design includes more rows and different angles. That requires additional safety testing.

Delta Air Lines had new Airbus A321neo planes in storage waiting for new lie-flat seats to be approved. But certification could stretch into 2028, and Delta is weighing whether to go with another supplier. Meanwhile, Delta temporarily installed 44 of its less-luxe first-class recliners on seven of those planes for cross-country flights.

Safran, the manufacturer of Delta’s new lie-flat seats, said certification—especially for business-class seats—has become more complex over the years, given new designs and features as well as technology that enables better understanding of passenger safety. The company said it is working with Delta to address the latest requirements.

Seat selection

The FAA said it is working with the industry to communicate and catch issues earlier in the development process, and avoid pitfalls.

Riyadh Air in early 2023 placed an order for a fleet of Boeing long-haul jets, aiming to challenge the dominance of rivals in the United Arab Emirates and Qatar while supercharging Saudi Arabia’s connectivity. It targeted the first half of 2025 for its first commercial flights, giving the carrier two years to get its new cabin and seats certified.

That proved too tight a deadline.

Riyadh Air was able to get over the finish line a year behind schedule with tweaks to its seat design. It was a relative victory compared with the yearslong battles competitors are still fighting to get theirs flying.

“I could write a Ph.D. on this subject, believe me,” said Tony Douglas, Riyadh Air’s CEO, in an interview earlier this month, shortly after the airline’s first commercial flight landed at London Heathrow airport.

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Some prosecutors believed they had enough to charge Abbott Laboratories, but senior officials opted for civil settlement

WASHINGTON—The Justice Department spent years investigating Abbott Laboratories ABT 0.94%increase; up pointing triangle over how it managed a baby formula facility where potentially deadly bacteria was discovered and suspected of causing infant deaths, worsening a national shortage.

Some prosecutors believed they had evidence to criminally charge the company under a law they have used to pursue other businesses for allegedly selling contaminated foods, according to people familiar with the matter. Some supervisors also thought it was a good case, they said. Top decision makers instead closed the probe, the people said, opting for a lighter-touch option: clawing back money the company earned from selling formula through federally funded nutrition programs.

The outcome, which hasn’t been previously reported, illustrates how the Justice Department under President Trump has moved away from strict approaches to corporate enforcement and raised the bar for punishing companies. Trump in an executive order last year called for minimizing the use of criminal sanctions, where civil penalties could be used instead.

Prosecutors had been considering a misdemeanor charge against Abbott for violating the federal Food, Drug and Cosmetic Act and a separate count for misleading the government, some of the people said. Investigators in early 2022 had found traces of a potentially deadly bacteria at its plant in Sturgis, Mich., including on equipment very close to infant formula containers—as well as a long list of other problems.

Prosecutors also were considering charging at least one individual, the people said.

A Justice Department spokeswoman confirmed the probe was closed, saying criminal charges would have been heavy handed and that officials instead resolved their concerns through a related civil lawsuit. That lawsuit focused on Abbott’s sale of infant formula through federal child-nutrition programs.

“Ensuring the safety of our nation’s food supply is a top priority for the Trump administration, however, this Department of Justice does not believe in regulation by prosecution,” the spokeswoman said. “Once finalized, this resolution will achieve significant recovery for taxpayers and send an unmistakable message that companies putting children’s health at risk will face serious consequences.”

Abbott has denied a link between the plant’s conditions and the children who fell ill. No unopened, distributed Abbott infant formulas have tested positive for the bacteria that sickened the babies, a company spokesman said.

The company’s defense lawyers included Mark Filip, who previously served as deputy attorney general under President George W. Bush. Filip last year also urged the Justice Department to overhaul the consumer-focused office that steered the investigation—and to remove its ability to bring criminal cases, people familiar with those discussions said.

A spokeswoman for Kirkland & Ellis, where Filip is a partner, said it is common practice for former Justice Department leaders to provide management advice to incoming administrations of both parties.

“Mr. Filip was happy to share his perspectives on DOJ and its policies and approaches with dozens of incoming DOJ officials in both Democratic and Republican Administrations in the past 16 years,” the spokeswoman said.

Acting Attorney General Todd Blanche last year said he supports penalizing companies when prosecutors also can identify and charge people behind the wrongdoing. But he has criticized going after companies when prosecutors don’t have enough evidence to charge individuals, or pursuing shaky cases that don’t appear to be winnable at trial.

Trump has nominated Blanche to the permanent position, and senators are expected to press Blanche about his views on enforcement during a confirmation hearing next month.

The Trump administration has more broadly said it disfavors prosecuting companies over laws that civil regulators can enforce. Prosecution should be reserved for cases in which companies or people “willingly choose not to comply, thereby causing or risking substantial public harm,” the White House wrote in a May 2025 executive order.

The executive order “brought a big sigh of relief to CEOs across the country,” said Bill Marler, a lawyer who represents victims of food-borne illnesses. The use of criminal penalties “did keep CEOs and people in the food business on their toes.”

The bacteria found at the plant in 2022, cronobacter sakazakii, can be found in household settings and is especially good at surviving in dry products like infant formula, according to the Food and Drug Administration. It is especially dangerous to young infants.

Cronobacter infections had sickened four babies who drank Abbott formula produced at the plant, two of whom died, but the company said there was no proof the infants became ill because of their baby formula.

FDA inspectors around that time found a long list of problems with the plant, including standing water in multiple locations and employees who worked directly with baby formula but didn’t adequately wash their hands. They also found the bacteria in multiple spots inside the plant and noted that the company had found the bacteria repeatedly in prior years.

A former FDA official later testified to Congress that five different strains of the bacteria had been found at the plant, calling the facility “out of control.”

Genetic testing conducted by the Centers for Disease Control and Prevention found that the bacteria that infected two of the infants weren’t closely genetically linked to samples found at the plant. But FDA officials told lawmakers that the cronobacter found in the plant is still a “serious concern” because such facilities are one of the most likely sources of contaminated formula.

The Justice Department said in November, as part of a related civil lawsuit, that Abbott “knowingly” failed to follow manufacturing standards to protect against the risk of contamination. That suit, which was joined by 31 states, alleged that Abbott had a “culture of concealment” at Sturgis and “withheld information from FDA related to the presence of microorganisms in the Sturgis facility.”

The department and Abbott have reached a settlement to resolve that case, which focuses on the company’s participation in federal programs that pay for baby formula for lower-income families. The proposed settlement hasn’t been formally announced but was disclosed to a court last month. The terms of the deal weren’t revealed.

Leveraged funds and margin debt have grown to unprecedented levels this year

Investors have never been more eager to ratchet up their stock returns through margin loans and funds that amplify gains and losses. It may be a sign of trouble.

U.S. margin debt, or what investors borrow from their brokerages to buy securities, rose 54% to a record $1.4 trillion in May from a year earlier, according to Finra data. Meanwhile, high-risk leveraged exchange-traded funds that produce double or triple the daily move of underlying stocks are growing rapidly, as is trading in options tied to them.

The risks surfaced this past week in South Korea, a market dominated by highflying semiconductor stocks and rife with investors eager to pile on leverage. Korean stocks gyrated, triggering circuit-breakers meant to stop losses on the way down. As the souring mood spilled into U.S. trading, hitting AI-related stocks, a chorus of investors and analysts sounded the alarm that leverage was building up here, too.

“I’m fearful that we’re building unintended leverage that isn’t fully understood,” said Mark Hackett, chief market strategist for Nationwide’s investment management group. “You’ve got people with a lottery mentality using margin to buy options on levered ETFs. That’s three or four layers.”

Buyers ranging from hedge funds to teenagers on Robinhood have poured money into leveraged ETFs this year, helping to nearly double the assets in these funds to a record $220 billion between March 30 and June 3, according to FactSet.

The most popular leveraged-fund offerings are tied to indexes of technology and semiconductor stocks, as well as individual companies like Tesla, Nvidia and most recently, SpaceX.

As investors large and small pile into megacap tech stocks, the funds have obvious appeal: Why own shares of Elon Musk’s SpaceX when a single-stock fund offers twice the exposure? And the sizzling chip rally that lifted Micron Technology by 300%? Impressive. But what about Direxion’s 3X Bull Semiconductor ETF, which soared some 700% between late March and late June?

The risks of buying leveraged funds are well-advertised: a 30% drawdown in the underlying stock can turn into a 90% wipeout for the fund. But Wall Street sees a broader problem emerging: These funds, along with other forms of leverage, can also affect how the individual stocks behave. The recent action in South Korea, market participants said, offers a glimpse at the risks.

In a bid to keep pace with the flow of new money, leveraged funds have bought some $300 billion in derivatives linked to single stocks and indexes since the end of March, Barclays analysts estimate.

Those purchases have in turn spurred demand for underlying shares from market makers, which buy stocks to hedge their exposure to the derivative contracts they write.

That’s almost certainly contributed to the sharp gains in corners of the stock market this year. But when stocks fall, leveraged funds lose assets. That forces them to reduce exposure to the shares they track, which in turn threatens to pull down stock prices even more. There is a danger, market analysts said, that this cycle can quickly spiral into heavy losses.

“That’s a somewhat terrifying figure to contend with should it need to be unwound in a short period of time,” Alexander Altmann, global head of equities tactical strategies at Barclays, told clients on Wednesday. “This is without a doubt the largest nondiscretionary driver of risk at the moment.”

Leveraged ETFs allow nearly anyone with a brokerage account the chance to supercharge their exposure to a stock market that has been posting gains not seen since the dot-com bubble a generation ago. But what goes up fast can crash down even faster.

On June 5, for example, the popular 3X semiconductor fund plunged 31% in a single session, roughly tripling its benchmark index’s decline, as intended.

If a leveraged fund grows large enough, it can start to have a significant impact on the underlying stock to which it is tied, a phenomenon traders refer to as “the tail wagging the dog.”

As stock volatility has increased, especially in sectors like semiconductors that have heavy leveraged-fund and options activity, analysts have started to scrutinize the role leverage is playing.

Geopolitical risks and the potential for rate increases have unnerved investors recently and could spark more volatility this week after the U.S. and Iran traded attacks heading into the weekend. The June jobs report, which could affect Fed rate decisions, is set for release Thursday.

“I am genuinely worried we have so much money going into the complex of leveraged single-stock products because the more money that goes in there, the more this procyclical trading effect happens,” said Dave Nadig, an industry veteran and director of research at ETF.com. “Anytime you have any known-in-advance, price-indiscriminate buyers and sellers, you have a problem.”

Trading related to massive leveraged funds tracking popular South Korean stocks like Samsung and SK Hynix accounted for as much as half of the average daily volume in those stocks in recent weeks, exacerbating share-price moves in both directions.

South Korea’s top financial regulator said earlier last week that he regretted not blocking the launch of leveraged single-stock funds.

“These are high-risk products, and it seems like about 92% of holders are retail investors,” Financial Supervisory Service Gov. Lee Chan-jin said at a press briefing. “Despite consumer warnings, trading hasn’t cooled.”

There’s no U.S. equivalent yet because the funds are smaller relative to the stocks they track, but investors should be mindful, Nadig said.

In the U.S., one of the largest brokerage firms just moved to rein in client leverage. Charles Schwab, which lets some customers buy securities with margin loans secured by the assets in their account, alerted advisers earlier in June that it was tightening margin requirements and would issue margin calls to investors who exceeded new thresholds, Bloomberg reported.