South Korea nearly doubles chip and AI spending in record budget

South Korean President Lee Jae Myung proposed a record 820.9 trillion won ($610.14 billion) budget for 2027 on Monday, with 21.3 trillion won for semiconductors, physical AI and AI data centers.

The chip and AI allocation, nearly double the 2026 level, ties more state money to the industry that has driven much of South Korea's growth. Exports rose 93.7% from a year earlier to a record $115.3 billion in October, Korea Customs Service data released on November 1 showed.

Speaking to the National Assembly, Lee said total spending would rise 12.8% and pledged to “boldly invest in AI and future growth engines,” CNBC reported. Physical AI refers to systems that run robots and other machines in the real world. A separate 4.7 trillion won will go toward a sovereign AI model, one built and controlled at home, that Lee said would have the “world's highest performance.”

The government also plans to train 2,000 specialists to “lead semiconductor design and the regional semiconductor industry” and to expand AI education for students, job seekers and existing workers. Universities already run “contract departments,” company-linked degrees whose students can secure jobs at Samsung Electronics and SK Hynix before graduation.

Defense spending is set to rise 8.2% to 73.3 trillion won, and the budget also raises social security spending for young people. Lee said the military would adopt “a hybrid manned and unmanned system based on AI, robots, and drones.”

Lee said the higher spending would bring “virtually no net increase in government debt,” with newly issued bonds used to repay existing debt. The International Monetary Fund forecasts South Korean growth of 3.3% in 2026, the fastest since the post-pandemic rebound in 2021.

Shipments totaled $930 billion in the first 10 months of 2026, passing $900 billion for the first time, and Lee said $1 trillion in annual exports was within reach. The chip boom has lifted the country's memory makers. SK Hynix announced $75 billion in shareholder returns on October 28 after its third-quarter net profit more than tripled, The Wall Street Journal reported, and Bloomberg reported that OpenAI Chief Executive Sam Altman met Samsung Group executives in South Korea on October 31 to deepen cooperation on memory chips.