South Korea allocates record budget to sovereign AI and semiconductors

South Korean President Lee Jae Myung presented the nation’s largest budget to date on Monday, committing to significant investment in artificial intelligence and future growth sectors. Addressing the National Assembly, the President stated that total expenditure for 2027 would increase by 12.8 per cent to 820.9 trillion won, equivalent to 610.14 billion dollars. This financial plan includes a dedicated allocation of 21.3 trillion won for semiconductors, physical AI and AI data centres, a figure that represents nearly double the spending level recorded in 2026.

A distinct portion of the budget, amounting to 4.7 trillion won, is earmarked for the development of a sovereign AI model. The President described this initiative as aiming for the world’s highest performance standards. The government is also prioritising human capital development by planning to train 2,000 specialists to lead semiconductor design and the regional industry. Educational measures include expanding AI training for students, job seekers and existing workers, alongside the establishment of university contract departments. These programmes allow students to enrol in company-linked degrees that provide direct pathways to employment at major firms such as Samsung Electronics and SK Hynix before graduation, with companies assisting in course design, financial support and recruitment.

The record spending plan coincides with strong economic forecasts, with the International Monetary Fund projecting South Korea’s economy will grow by 3.3 per cent in 2026. This would mark the fastest pace of growth since the post-pandemic rebound in 2021. President Lee indicated that the increased spending would result in virtually no net increase in government debt, as newly issued bonds would be used to repay existing obligations. The budget also raises defence expenditure by 8.2 per cent to 73.3 trillion won, focusing on transforming the military into a smart and powerful force through AI, robots and drones. This fiscal strategy supports a broader economic trend driven by semiconductor exports, which surged 93.7 per cent year-on-year to a record 115.3 billion dollars in October. Total shipments reached 930 billion dollars in the first ten months of 2026, surpassing the 900 billion dollar mark for the first time, while the country recorded a 42.5 billion dollar trade surplus in October.