Samsung Electronics Co. received a setback in its $5 billion project to construct a next-generation fab in its chipmaking base in Hwaseong, Gyeonggi Province after the host city refused to license the plant, citing the need for the company to make a contribution to public traffic infrastructure.

Samsung Electronics, which vowed $20 billion in facility investment in the first half of the year, had planned to spend 6 trillion won ($5.3 billion) to build the fab Line 18 in its Hwaseong complex to meet the demand of fab-less clients.

It had hoped to start construction in November and complete it for operation in the second half of 2019. The fab would be equipped with its cutting-edge extreme ultraviolet equipment, a key device to process chips below 7 nanometers.

The plan was vital to Samsung Electronics’ roadmap to become the world’s second largest foundry player after Taiwan Semiconductor Manufacturing Co. (TSMC). Foundry is the business of manufacturing and packaging chips upon client orders. The Korean tech giant currently stands fourth with a share of 7.9 percent and wants to up its presence to cement its position as the world’s top semiconductor maker, a title it stole from Intel this year.

The delay is reportedly caused by a government traffic impact study, required for all large-scale operations including Samsung’s new plant, which will command a space of over 330,000 square meters.

The study predicted worsening traffic congestion in the area between Hwaseong and Suwon. Urban development is also underway which would add 7,000 households in Mangpo 4 district, Suwon, in 2019.

The city government asked Samsung to contribute to the plan to build a 70 billion-won underground roadway to ease traffic congestion. Samsung refused, claiming the city’s reckless housing policy has worsened the traffic situation and not its expansion.

The two parties are in talks but Samsung is unlikely to begin construction on Nov. 15 as scheduled.

Samsung Electronics is the biggest revenue source for the city. It paid around 160 billion won in local taxes to the Hwaseong government last year.

The new fab is expected to contribute 15.3 trillion won to the national economy and hire 53,000 people, according to Bank of Korea.

By Lee Dong-in and Kim Hyo-jin

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