Jun Ji-hye, a reporter at the finance desk of The Korea Times, focuses primarily on economic policy and government agencies, mainly covering the Ministry of Finance and Economy, the Ministry of Budget and Planning, the National Tax Service and the Korea Customs Service. She previously covered financial authorities, including the Financial Services Commission and the Financial Supervisory Service, and earlier worked on the political, city and business desks, reporting on a wide range of issues.
Gov't bets big on AI, chips for 2027 budget to compete in global tech race
Budget Minister Park Hong-geun briefs the Cabinet on the 2027 budget proposal during a Cabinet meeting presided over by President Lee Jae Myung at Cheong Wa Dae, Tuesday. Yonhap
By Jun Ji-hye
Semiconductor boom fuels record 'super budget'
The government plans to significantly ramp up investment in artificial intelligence (AI) and semiconductors to prevent structurally low growth from becoming entrenched and strengthen Korea’s position in the global tech race through its record-high 2027 budget of nearly 821 trillion won ($599 billion), the Ministry of Planning and Budget said Tuesday.
It has designated semiconductors, physical AI and AI data centers as the three megaprojects in its plan to provide comprehensive support, ranging from key infrastructure to technology development, with an injection of 21.3 trillion won.
President Lee Jae Myung said at a Cabinet meeting that a major shift is underway in the global industrial order as the AI revolution, energy transition and restructuring of global supply chains converge to reshape the global economy and industries.
"Against the backdrop of these sweeping changes, next year’s budget should serve as a solid foundation for Korea to emerge as a global leader in cutting-edge technologies," Lee said.
"We need a productive fiscal strategy that uses expanded resources for future growth to enlarge the economic pie, strengthen industrial competitiveness and, in turn, create greater fiscal room," he added.
According to Budget Minister Park Hong-geun, the 2027 budget proposal will establish a special account for semiconductors to maintain and strengthen Korea’s technological edge, with funding directed toward expanding production capacity, securing core technologies and strengthening the industry ecosystem.
“The government will also step up support for physical AI by investing 2.6 trillion won in demonstration projects and provide key infrastructure, including power, water and industrial complexes, to support the three megaprojects,” Park said. “We will supply 10,000 graphics processing units, plus data and workers to help a national AI foundation model achieve globally competitive performance and develop AI services for the public.”
As the first of five investment priorities in its budget proposal, the government identified full-scale support for the three megaprojects, seeking to boost investment in advanced technologies and stave off a decline in potential growth caused by a shrinking working-age population and stagnant productivity. Funding for the projects is set at 21.3 trillion won, up by 97.2 percent from this year.
The second priority is securing future growth engines, with 62.8 trillion won allocated, up 22.7 percent from this year. The funding will focus on seven key national strategic technologies, including fusion energy, small modular reactors, quantum technology, aerospace and advanced biotechnology.
The third is to strengthen support for young people, focusing on education, jobs, entrepreneurship, housing, marriage, childbirth and child-rearing. The government will allocate 43.3 trillion won to these efforts, up 53.5 percent from this year.
The fourth priority is reducing inequality by expanding investment in industrial, medical, educational and living infrastructure in regional areas, while providing full tuition support at regional national universities and expanding the basic income program for rural and fishing communities. The government also plans to expand employment opportunities for seniors. This area received the largest allocation of funds, at 117.1 trillion won.
The fifth priority is to strengthen public safety and economic security through measures including the acquisition of advanced military assets such as nuclear-powered submarines, improved support for military personnel and veterans, expanded disaster-prevention infrastructure, a comprehensive response to drug-related threats and efforts to stabilize supplies of key materials. The government will allocate 38.3 trillion won to this area.
The budget proposal approved by Cabinet calls for total revenue of 880.8 trillion won, up more than 200 trillion won from this year, fueled by a sharp increase in corporate and income tax revenue amid the semiconductor boom.
Park pledged to use increased tax revenue from the semiconductor boom to invest in economic and social innovation and future growth engines as global competition for AI leadership intensifies.
At the same time, the government plans to pursue sweeping spending reforms to tackle structural challenges such as the low birthrate, population aging and regional decline. It also aims to complete repayment next year of public funds injected during the 1997-98 Asian financial crisis.
“This officially concludes the country’s nearly 30-year journey to overcome the International Monetary Fund crisis while creating greater fiscal room for investment in future generations,” Park said.
President Lee Jae Myung speaks during a Cabinet meeting at Cheong Wa Dae, Tuesday. Yonhap
Future Fund
In addition, Park said the government will revamp its fiscal framework and create a Future Fund to ensure more strategic use of public finances for future generations.
The new fund, separate from the budget, is designed to channel a portion of the additional tax revenue generated by the semiconductor boom into productive investments while serving as a buffer against fluctuations in tax revenue.
According to the budget ministry, the government expects additional tax revenue of 162.3 trillion won in 2027 compared to its earlier expectations, which will be used to create the fund. Of the money, it will allocate 45.4 trillion won to four areas — youth, future growth engines, regional development, and education and labor.
The remaining funds will be held as reserves to absorb revenue swings and shore up fiscal capacity if tax collections fall short of projections.
Combined with the 821 trillion won in total spending under the 2027 budget and the more than 160 trillion won Future Fund, the government will have nearly 1 quadrillion won in fiscal resources at its disposal next year.
Park also said the government will reform the link between the local education grant system and domestic tax revenue for the first time in 55 years to reflect changing economic and social conditions.
Funds freed up through the reform will be channeled into an "education and labor" account within the Future Fund and used mainly for early childhood, higher and lifelong education.
“The 2027 budget will be a turning point in fiscal policy, as it would overhaul the fiscal management paradigm, make bold investments for the future and reform outdated spending structures that no longer reflect social changes,” Park said.
Under the National Finance Act, the government must submit the budget proposal to the National Assembly by Thursday, 120 days before the start of the fiscal year.
The ruling Democratic Party of Korea and the main opposition People Power Party are expected to engage in a legislative battle over the budget and housing supply-related bills during the 100-day regular parliamentary session starting Tuesday.