South Korea’s government will inject 21.3 trillion won (approximately $15.5 billion) into semiconductors and artificial intelligence (AI) in next year’s budget. This represents a 97.2% increase from last year’s 10.8 trillion won (approximately $7.9 billion), with a focus on building an ecosystem to maintain semiconductor supremacy and position the country as an AI leader.

According to the 2027 budget proposal finalized at a Cabinet meeting on the 1st, the government has allocated these funds for three mega-projects and AI support. Park Hong-keun, Minister of Economy and Finance, stated, “We will concentrate investment on building an ecosystem to protect Korea’s semiconductor superpower edge,” adding, “We will expand future growth engines so that a second semiconductor miracle can be achieved.”

A new “Special Account for Strengthening Semiconductor Industry Competitiveness” worth 2.6 trillion won (approximately $1.9 billion) will be established to build semiconductor production infrastructure. Of this, 6 trillion won (approximately $4.4 billion) will be invested over four years in establishing a semiconductor production hub and ecosystem in South Korea’s southwestern region, with 1.5 trillion won (approximately $1.1 billion) allocated for next year alone. Eight new sectors have been designated for expanding physical AI demonstration and deployment, with 500 billion won (approximately $364.3 million) committed, while 1.5 trillion won (approximately $1.1 billion) has been allocated for securing core AI technologies.

Development of the Yongin Semiconductor National Industrial Complex is also accelerating. Korea Land and Housing Corporation (LH) will break ground on the first construction zone in October. Land compensation, which began late last year, has completed procedures for 99% of the total privately-owned land subject to compensation—including priority zones—within seven months. Negotiated acquisitions are 43% complete, with expropriation adjudication applications at 56%. LH plans to shorten the expropriation adjudication period in consultation with the government and complete compensation procedures within the year.

Post-Semiconductor Era: ₩41.4 Trillion Allocated

The government has set aside 41.4 trillion won (approximately $30.2 billion) for fostering advanced strategic industries that will lead South Korea’s economy beyond semiconductors. This is a 14.4% increase from this year’s 36.2 trillion won (approximately $26.4 billion). In particular, the R&D budget for securing next-generation core technologies stands at 39.5 trillion won (approximately $28.8 billion), up 11.2% year-on-year. This marks a second consecutive year of double-digit increases following last year’s 19.3% jump.

The increased R&D budget will be concentrated on the “7 SEED National Strategic Core Technologies” presented as new growth axes. These seven areas include small modular reactors (SMRs), nuclear fusion, renewable energy, quantum, aerospace, advanced bio, and advanced supply chains. These are ultra-long-term R&D projects looking 10 to 20 years ahead, with the government planning to establish a public-private joint Future Frontier Promotion Group and review sector-specific roadmaps through the Science and Technology Ministers’ Meeting.

Investment in the “NEXT 10 Strategic Technology Areas” that will succeed semiconductors will also expand from this year’s 11.2 trillion won (approximately $8.2 billion) to 15 trillion won (approximately $10.9 billion) next year. The 10 technologies under the National Strategic Technology Development Act include AI, advanced robotics and mobility, next-generation security and networks, innovative and future materials, future energy and nuclear power, quantum, semiconductors and displays, advanced bio, next-generation batteries, and aerospace and marine. The aerospace sector will see funding increase from 1.2 trillion won (approximately $874.3 million) this year to 1.8 trillion won (approximately $1.3 billion) next year, directed toward developing a lunar landing launch vehicle by 2030.

A Ministry of Economy and Finance official explained, “The NEXT 10 technologies are an advanced strategic industry technology group that encompasses semiconductors and AI, which are already national strategic technologies,” adding, “The 7 SEED technologies are core R&D areas selected from among future-leading and disruptive innovation technologies that will become new growth axes for South Korea, with concentrated investment from an ultra-long-term perspective.”

EV Subsidies for 430,000 Units; Startup and SME Support Also Expanded

In line with the carbon neutrality transition, electric vehicle purchase subsidy support will expand to a record 430,000 units. This is a significant increase from the previous 300,000 units, with the EV subsidy budget rising from approximately 2.3 trillion won (approximately $1.7 billion) in each of the last two years to 3 trillion won (approximately $2.2 billion) next year. The measure comes as EV demand accelerates sharply, with EVs’ share of total new car registrations rising 12.2 percentage points from 11.1% in the first half of last year to 23.3% in the first half of this year.

A total of 4.5 trillion won (approximately $3.3 billion) will be invested in revitalizing the startup ecosystem. Nineteen “Re-Challenge Success Schools” will be established so that failure experience becomes a growth asset, while ongoing startup projects will receive enhanced follow-up commercialization support. For SME innovative growth, 300 companies in new growth sectors will be selected through cross-ministerial collaboration, and export support for consumer goods including K-food will also be expanded. The number of companies eligible for export vouchers to overcome trade barriers is expected to increase to 10,893.

Note: Budget figures in this article are based on the 2027 budget proposal, and year-on-year growth rates are based on government announcement data.