SEOUL — South Korea is making a major bet on artificial intelligence and semiconductors as the government proposes its largest-ever annual budget, seeking to strengthen the country’s position in the rapidly intensifying global technology race.
The government has proposed ₩820.9 trillion ($597 billion) in total spending for 2027, representing a 12.8% increase from this year’s original budget. The proposal marks the largest year-on-year increase in South Korea’s budget since comparable records began.
At the heart of the plan is a ₩21.3 trillion investment package covering three major technology priorities: semiconductors, physical AI and AI data centers. The allocation is nearly double this year’s spending for the projects.
AI and chips take center stage
The government plans to create a special semiconductor account worth ₩2.6 trillion aimed at expanding production infrastructure, developing core technologies and strengthening the domestic semiconductor ecosystem.
A further ₩6 trillion is planned over four years for a semiconductor hub in southwestern Korea, with ₩1.5 trillion earmarked for the first year. The strategy is designed to expand production capacity while supporting infrastructure needed by chip manufacturers.
South Korea is also putting substantial resources behind physical AI — technologies that allow artificial intelligence to interact with and operate in the physical world.
The government plans to invest around ₩2.6 trillion in physical-AI demonstration projects, while also developing AI technologies that can be applied to manufacturing and other industrial sectors.
Seoul wants its own AI capability
Another major component is the push to develop a globally competitive domestic AI foundation model.
The government says it will support the acquisition of 10,000 GPUs, along with data and talent, to help Korean developers build high-performance AI systems. South Korea’s science ministry separately proposed ₩9.4 trillion for AI-related spending in 2027, an increase of about 84% from the current year’s level.
The science ministry’s overall proposed budget is ₩29.6 trillion, up 24.5% from the current year’s supplementary budget. Research and development spending under the ministry would reach ₩14.1 trillion.
Why South Korea is moving now
The spending push comes as the country’s semiconductor industry benefits from soaring demand linked to the global AI boom.
South Korean companies such as Samsung Electronics and SK Hynix are major players in memory chips used in AI computing systems, particularly high-bandwidth memory.
Reuters reported that the semiconductor boom is helping drive a sharp increase in government tax revenue, giving Seoul additional fiscal room to increase spending on technology and other priorities.
Recent export figures also underline the strength of the chip cycle. South Korea’s August exports jumped 68.7% year-on-year, while semiconductor exports reached a record $46.65 billion, according to reporting on the latest trade data.
That dependence on semiconductors, however, also presents a challenge: Seoul wants to use today’s chip boom to build industries that can sustain growth beyond the current memory-chip cycle.
A broader technology strategy
The AI and semiconductor push is only part of the government’s wider economic strategy.
The 2027 proposal allocates ₩62.8 trillion toward future growth engines, including areas such as nuclear fusion, small modular reactors, quantum technology, aerospace and advanced biotechnology.
The government has also proposed a Future Response Fund, intended to channel additional tax revenues from the semiconductor boom into longer-term investments rather than relying on those revenues for recurring spending. Reuters previously reported that the fund is designed to help Korea manage volatile semiconductor-related revenues while financing future growth.
The catch: the budget isn’t final yet
Despite the size of the proposal, the spending plan still has to go through South Korea’s National Assembly.
That means the final amounts and individual programs could change during the parliamentary budget process.
Still, the direction is unmistakable: Seoul wants AI, semiconductors and next-generation technologies to become central pillars of Korea’s future economic growth.
President Lee Jae-myung’s administration has framed the strategy as a response to major changes in global industry, including the AI revolution, shifting supply chains and the race for technological leadership.
And with the United States, China, Taiwan, Japan and other economies racing to secure their positions in AI and advanced chips, South Korea is signaling that it does not intend to sit on the sidelines.
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