South Korea has proposed a record 821 trillion won ($596.9 billion) budget for 2027, with a major portion of the spending aimed at accelerating investment in artificial intelligence, semiconductors and other key technologies.
The proposed budget is 12.8% higher than the 2026 allocation, marking the biggest annual increase in government spending on record. The administration of President Lee Jae-myung is looking to leverage the country’s strong semiconductor sector and higher tax revenues to fund investments in emerging technologies.
AI and chip development are among the government’s key priorities. The plan includes 2.6 trillion won for AI demonstration projects and a further 2.6 trillion won for semiconductor initiatives, including the creation of a dedicated semiconductor fund. Seoul also plans to supply 10,000 GPUs to help develop a domestic AI foundation model.
The increased spending comes as South Korea’s semiconductor industry benefits from growing global demand for chips used in AI data centres. Companies including Samsung Electronics and SK Hynix have benefited from rising demand for high-bandwidth memory chips, which are increasingly important for advanced AI systems.
The government expects corporate tax revenues to rise significantly in 2027, helped by the strong performance of the semiconductor industry. It plans to use part of the additional revenue to finance a 162.3 trillion won Future Response Fund, which will support investments in AI, semiconductors, youth initiatives and other next-generation industries.
Defence is another area receiving additional funding, with the government allocating 3.4 trillion won for strategic defence spending. At the same time, Seoul expects its debt-to-GDP ratio to decline from an estimated 51.6% to 48.3% next year.
The large-scale spending proposal comes amid continued concerns over inflation, household debt and property prices. The Bank of Korea has also been monitoring inflationary pressures as the economy benefits from strong semiconductor exports.
The proposed 2027 budget still needs approval from South Korea’s National Assembly. If approved, the plan would represent a major expansion of government support for AI and advanced technologies, highlighting Seoul’s ambition to strengthen its position in the global AI race.
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