South Korea's President Lee Jae Myung has announced plans to double the country's spending on artificial intelligence and semiconductors in 2027. In his annual budget speech to parliament, Lee revealed that 21.3 trillion won, approximately $16 billion, will be allocated to chipmaking and AI, covering areas such as data centers and robotics. This significant investment is expected to boost the country's economy and transform its military into a "smart, elite force".
The increased spending on AI and chips is part of a broader budget plan that totals 821 trillion won, a 12.8 percent increase from the previous year. This makes it the largest budget proposal on record. Lee's party has a majority in parliament, making it likely that the budget proposal will be passed. The investment in AI and chips is seen as crucial for South Korea's economy, which is driven by tech giants such as Samsung Electronics and SK hynix.
South Korea is home to two of the world's largest makers of memory chips, Samsung Electronics and SK hynix. The demand for these chips has surged due to the AI boom, resulting in significant profits and share price increases for the companies. However, the boom has also led to tense negotiations between chip engineers and other workers seeking higher payouts.
The government's investment in AI and chips is part of a larger effort to drive growth and innovation. In June, Lee announced a public-private partnership focused on "three mega-projects" aimed at expanding chip production hubs, establishing robotics research and development centers, and building gigawatt-scale AI data centers. The projects are expected to attract significant investment, with nearly $1.2 trillion committed.
The investment in AI and chips is also seen as a strategic move to counter North Korea's growing military capabilities. North Korea has recently tested several advanced weapons, including a new precision-guided torpedo system and an intermediate-range hypersonic missile, both of which are believed to use AI technology. In response, South Korea has announced plans to build nuclear-powered submarines and develop advanced military capabilities.
In addition to the investment in AI and chips, the government has announced plans to invest 4.7 trillion won in frontier AI development projects. The goal is to achieve world-leading performance for South Korea's own AI model, which is considered a national strategic asset. The government will also invest 2.1 trillion won in infrastructure, including electricity and water supply, to support the growth of the semiconductor industry.
The budget proposal also includes a 162.3 trillion won "Future Fund" aimed at channeling tax revenues from the chip boom into long-term growth. The fund is expected to play a crucial role in driving innovation and investment in key sectors. With the budget proposal likely to be passed, South Korea is set to make significant investments in AI, chips, and defense in 2027.
Key points
- South Korea to double spending on AI and chips to $16 billion in 2027
- Investment part of broader budget plan to drive growth and innovation
- Goal is to transform military into "smart, elite force" and counter North Korea's growing military capabilities
