South Korea plans to spend 21.3 trillion won (€14.3 billion) on artificial intelligence, semiconductor manufacturing and data centres next year as the country attempts to strengthen its position in the global technology industry.
According to Seoul Economic Daily, President Lee Jae Myung announced the investment during a parliamentary address on 2 November, calling for approval of a record 820.9 trillion won (€551 billion) national budget for 2027. Government spending would increase 12.8 per cent, the largest annual rise on record.
The technology allocation is almost twice this year’s level and will fund three major projects covering semiconductor production, physical AI and AI data centres. Seoul hopes the investment will strengthen an industry already enjoying enormous profits from the global memory shortage.
“We will invest 21.3 trillion won, nearly twice this year’s amount, in AI and the three megaprojects of semiconductors, physical AI and AI data centres,” Lee said.
South Korea has benefited enormously from demand for advanced semiconductors, particularly high-bandwidth memory used by AI accelerators. Samsung Electronics and SK Hynix have enjoyed surging earnings as technology giants scramble to secure supplies for their increasingly expensive computing infrastructure.
The government intends to allocate 2 trillion won (€1.34 billion) to expanding semiconductor production capacity, including accelerating chip fabrication projects around Seoul and developing a new manufacturing cluster in the southwest of the country.
Another 2.1 trillion won (€1.41 billion) will support the electricity, water supplies, and industrial infrastructure semiconductor manufacturers need. Lee wants to prevent companies from missing investment opportunities because the government failed to provide the necessary facilities.
Physical AI will receive 500 billion won (€336 million) for demonstrations across eight industrial and public sectors, including manufacturing, smart factories and defence. The programme is intended to encourage wider use of intelligent robotics and autonomous machinery.
The government has earmarked 4.7 trillion won (€3.16 billion) to develop domestic AI technology, including efforts to create Korean models that can compete with the industry’s leading systems. Seoul is particularly concerned about depending on foreign technology for strategically important applications.
Lee announced another 13.8 trillion won (€9.27 billion) for 10 emerging technology sectors intended to provide future sources of economic growth. Overall research and development spending is expected to reach a record 39.5 trillion won (€26.5 billion).
Extraordinary semiconductor profits are supporting the spending plans. South Korea’s chipmakers have benefited from higher memory prices and booming exports, helping the economy grow faster than expected during the third quarter.
The government intends to establish a 162.3 trillion won (€109 billion) Future Response Fund, partly supported by additional semiconductor-related tax revenue. The fund will support industrial development, regional investment, education and measures intended to improve economic opportunities.
Lee has asked parliament to approve the budget by 2 December. His Democratic Party holds a legislative majority, although the opposition People Power Party has criticised the spending plans and warned about their implications for government debt.
