South Korean memory chip manufacturer SK hynix has reached a compromise with Yeoju city over a dispute surrounding the chipmaker's right to use freshwater for new fabrication plants in Yongin, Gyeonggi Province, the government announced Monday.

The settlement, with a memorandum of understanding signed on Monday at the National Assembly, opens the doors for SK hynix to proceed the chip cluster project as planned by 2027 on the 4.15 square-kilometer site, which would cost at least 120 trillion won ($88.4 billion), according to the Ministry of Trade, Industry and Energy.

The MOU was signed between SK hynix co-Chief Executive Officer Kwak Noh-jung, Yeoju City authorities and a representative of construction project manager Korea Land and Housing. Also attending the signing ceremony were Industry Minister Lee Chang-yang and Rep. Chung Jin-suk of the ruling People Power Party.

Lee said in a statement the announcement leaves no administrative hurdles for the blockbuster project, after a close coordination between parties concerned, as well as government authorities and lawmakers.

This comes a few days after Yeoju, a city near Yongin, approved Thursday the chip plants' use of freshwater from the area that is over 30 kilometers away from the chip plant location, according to the government. The cluster is to consume up to 570,000 metric tons of water on a daily basis, mainly to stave off contamination in its chipmaking process.

Before the announcement, Yeoju Mayor Lee Choong-woo had openly refused to approve SK hynix's use of freshwater, citing the possibility that the installation of the pipeline that traverses three cities in Gyeonggi Province -- Yeoju, Icheon and Yongin -- will hamper the industrial development of Yeoju due to land use restrictions imposed near the infrastructure.

This has effectively halted the site work in Yongin that kicked off in April.

In return for Yeoju's approval, the government on Monday pledged to carry out deregulation regarding factory construction in the region and increase access to water sewage treatment facilities.

In line with this, SK hynix will review plans to support marginalized people in Yeoju through community-based campaigns, promote Yeoju's agricultural products and train semiconductor industry professionals in Yeoju.

(consnow@heraldcorp.com)