South Korea Proposes Nearly Doubling AI Spending to 21.3 Trillion Won in 2027 Budget

South Korea wants to nearly double what it spends on artificial intelligence next year. In his budget speech to the National Assembly, President Lee Jae-myung said the government will put 21.3 trillion won (roughly $16 billion) into AI and three "mega-projects": semiconductors, physical AI and AI data centers.

That compares with 10.8 trillion won in 2026, a jump of about 97%.

"We will make bold investments in AI and future growth engines to boost our economy's growth potential, which is the foundation of its economic strength," Lee told lawmakers.

Where the AI money goes

One source breaks down the proposal's line items as follows:

• Semiconductors: 3.4 trillion won
• Physical AI, including robotics: 3.1 trillion won
• AI data-center ecosystem support: 500 billion won
• Infrastructure development: 2.1 trillion won

Lee singled out 4.7 trillion won for frontier AI development, with the goal of "world-leading performance for our own AI model, a national strategic asset." The plan includes money for 10,000 next-generation GPUs for sovereign models and 250 billion won for a free public AI service. The government will also launch an "AI for all" project, including public AI agents that support public services from guidance to application.

Separately, the government plans a special account to boost semiconductor competitiveness, with 2 trillion won to expand production capacity. Another 500 billion won would fund on-site demonstrations of physical AI in eight core areas, including manufacturing, smart factories and defense.

Budget Minister Park Hong-geun said the government will "provide full support for building essential infrastructure, including electricity and water supplies, and industrial complexes" so investment in the three mega-projects "proceeds without delay."

The bigger budget

The AI line sits inside a total budget of 820.9 trillion won, the largest ever proposed. That is up 12.8% from this year's 728 trillion won.

The overall budget is growing at 12.8%. The AI slice is growing at roughly 97%.

The government says it will restructure 107.2 trillion won in spending across 6,476 projects. It also wants 62.8 trillion won, up 22.7%, for growth engines beyond chips, including nuclear fusion, small modular reactors, quantum technology, aerospace and advanced biotech. Research and development would reach 39.5 trillion won, up 4 trillion won and a record. Another 13.8 trillion won is earmarked for 10 next-generation strategic technology fields.

The government is not the only one spending. Industry commitments cited alongside the plan run far larger than the public budget: more than 800 trillion won for semiconductor fabrication and 550 trillion won for AI data center construction. The state's role looks less like sole financier and more like a catalyst that supplies infrastructure and strategic purchases.

Paid for by the chip boom

A large part of the funding logic rests on a new "Future Fund" of 162.3 trillion won in 2027. It would be financed by tax revenue above the long-term trend, driven by the semiconductor boom. South Korea is home to Samsung Electronics and SK hynix, two of the world's three biggest memory-chip makers.

Lee described the fund as "a strategic investment platform supporting a recovery in potential growth, as well as an innovative fiscal stabilization mechanism to manage increasingly volatile tax revenues."

The wording is revealing. The president is saying the revenue is volatile, and the plan ties a growing share of public spending to it. If chip earnings cool, the surplus that funds the AI push shrinks with them.

Defense and household spending

The budget is not only about chips. Defense would rise 8.2% to 73.3 trillion won. Lee said the government will aim to secure nuclear-powered submarines and KF-21 fighter jets and build "integrated manned and unmanned systems based on AI, robots and drones."

On the domestic side, Lee framed the package as a shift to "growth for all" rather than "growth for a few." The youth budget would rise 53.5% to 43.3 trillion won. A new basic child allowance would pay 200,000 won a month up to age 12, and newlyweds would receive 1 million won in marriage support.

The plan also includes 33 trillion won, more than double this year, for regional development. The government would begin moving 44 central agencies from the Seoul area to Sejong in phases starting next year.

What comes next

The Cabinet approved the proposal on Sept. 1, and it is now before the National Assembly. Lee asked lawmakers to pass the budget and accompanying legislation by Dec. 2, the deadline set by law. This was his fourth budget address since taking office.

Passage is considered likely because Lee's party holds a majority. Whether the tax windfall behind the Future Fund holds through 2027 is the key uncertainty, since the figures remain a proposal until the National Assembly passes them.