South Korea prioritises AI and semiconductor investment in the 2027 budget

South Korea plans to introduce a record national budget exceeding KRW 800 trillion (around €500 billion) in 2027, with semiconductors, AI and youth employment at the centre of its investment strategy.

Announced during the National Fiscal Strategy Meeting, the proposed budget would increase by more than 10% compared with 2026, reflecting the government’s focus on strengthening industrial competitiveness, technological leadership and long-term economic growth.

A significant share of the funding will support three flagship initiatives focused on semiconductors, AI data centres and physical AI technologies.

The government also plans to accelerate the development of Yongin and the Honam region as major semiconductor manufacturing hubs through administrative measures including fast-track licensing and exemptions from preliminary feasibility studies for strategic projects.

Beyond industrial policy, the budget includes measures aimed at supporting citizens directly. A new Future Response Fund will finance the training of 200,000 young professionals, help create around 300,000 jobs and improve housing stability.

South Korea also plans to expand employment insurance and workers’ compensation coverage for platform workers while establishing a new K-Labour Council to strengthen labour protections.

To address fiscal sustainability, the government announced a comprehensive review of public spending aimed at generating around KRW 50 trillion in efficiency savings, described as the largest restructuring of government expenditure in the country’s history.

According to the government, the combination of strategic investment and spending reforms is intended to promote innovation while maintaining long-term fiscal sustainability.

Why does it matter?

The budget demonstrates how industrial policy is becoming a central tool for strengthening technological competitiveness. By prioritising semiconductors, AI infrastructure and advanced manufacturing, South Korea is seeking to reinforce its position in sectors that are increasingly viewed as critical to economic growth and national security.

The package also shows that governments are increasingly pairing technology investment with workforce development and labour reforms. Building AI and semiconductor capacity will require not only infrastructure and capital but also a skilled workforce capable of supporting long-term innovation.

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