South Korea won out as the location for a 3.8 trillion won ($4.1 billion) chip factory for Hynix Semiconductor, despite speculation China might win the project.

Trouble winning an environmental permit at one factory location and a huge markup in land prices near another Hynix plot had put the decision in doubt earlier this year. The South Korean memory chip maker ran into so much trouble that speculation arose it would build in China instead. But on Thursday, Hynix said it had already broken ground on the 12-inch (300 millimeter) chip factory in Chongju, Korea.

Hynix plans to produce NAND flash memory chips, which are mainly used in digital music players and flash memory cards, at the new facility. When it opens in the second quarter of next year, the factory will use a 48-nanometer production process to etch transistors and other components onto chips.

A nanometer is a term that describes the size of the smallest feature that can be manufactured on a single chip. There are about three to six atoms in a nanometer, depending on the type of atom, and there are a billion nanometers in a meter. The smaller manufacturing processes are needed to shrink chips, make them more powerful, and more energy efficient.

Earlier this year, South Korea's environmental protection agency turned down a Hynix request to build the 12-inch factory near a factory complex it owns in Ichon, Kyonggi Province, for fear it might contaminate a nearby river.

The company then turned to Chongju, where it already owned a piece of land near a separate manufacturing complex, but ran into further trouble because the land was too small for the proposed facility. Land speculators then snapped up nearby plots and bid the price of the land up until Chongju became too expensive.

The ground breaking at Chongju indicates the impasse was resolved, but the company did not say how.