South Korea-based memory maker SK Hynix announced Tuesday it will invest 19 trillion Korean won ($12.9 billion) to build a new advanced packaging plant, as it expands production to meet rising demands driven by the artificial intelligence boom. 

The new fabrication facility will be located in the Korean city of Cheongju, building on the company’s existing footprint there. Construction set to begin in April, with completion targeted for the end of 2027, the firm said in a statement.

SK Hynix is among the world’s largest producers of memory chips and leads the world in so-called high-bandwidth memory (HBM), which is used in artificial intelligence processors, including those designed by U.S. chipmaker Nvidia. 

The new fab will help SK Hynix meet growing demand for HBM as global AI competition intensifies, pushing up prices and making it very lucrative for memory giants.

According to industry projections cited by SK Hynix, the HBM market is expected to expand at a compound annual growth rate of 33% between 2025 and 2030.

However, the shift by producers to meet AI demand has strained supplies of conventional memory chips, raising concerns that shortages could impact the broader electronics industry. 

In response, memory chip makers have been expanding production capacity, as with SK Hynix’s new advanced packaging and testing facility.

Advanced packaging in memory is the process of combining multiple memory chips into a single, high-density unit to improve performance and energy efficiency while reducing overall size.

SK Hynix rival Samsung Electronics has also announced plans to ramp up HBM production in recent months.