South Korea will draw up record budget spending of more than 800 trillion won ($530.97bn) for fiscal 2027, supported by stronger tax revenues from the booming AI chip industry, the government said on Monday.
It is the clearest sign yet that Seoul intends to spend the semiconductor windfall rather than save it, an argument the country has been having since it floated a ‘future response fund’ built on chip tax receipts earlier this month.
Budget Minister Park Hong-keun, speaking at a national fiscal strategy meeting, said the plan would be financed through higher tax receipts and expenditure cuts. The proposal compares with this year’s 727.9 trillion won spending plan, excluding supplementary budgets.
Three “mega-projects”, covering chips, AI data centres and physical AI, will receive top fiscal priority. The government said it would secure the funding capacity through a major restructuring of existing programmes rather than relying solely on the extra tax revenue, which is a more disciplined framing than the numbers alone suggest.
Park said the restructuring would target about 50 trillion won of spending, twice last year’s level, through a review of discretionary and mandatory expenditures and cuts to underperforming programmes. That is the part of the plan that will meet resistance, because every underperforming programme has a constituency.
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President Lee Jae Myung said the government would use all available means to keep corporate investment on schedule. “Additional tax revenue coming at this time is a precious resource to be used at a golden time when global AI dominance will be determined,” he said.
The windfall is real and it is concentrated. Combined operating profits at Samsung Electronics and SK Hynix are projected to exceed 600 trillion won this year, up from roughly 90 trillion won a year earlier, and semiconductors now account for a rising share of national exports.
Seoul has already committed $880bn to chips, data centres and robots over the next decade under the same mega-project framing. The 2027 budget is the first annual instalment that has to be written against actual receipts rather than pledges.
It is also a visible upgrade on the government’s own plan. Under fiscal guidelines approved by the Cabinet in March, 2027 spending was pencilled in at 764.4 trillion won, with officials saying at the time that the figure could reach around 800 trillion won only if tax revenues improved and the expansionary stance held. Both conditions, it turns out, were met by the chip cycle.
The Future Response Fund now has a defined shape, at least on paper. It will operate as a strategic investment platform, setting aside tax revenue that exceeds long-term trends and directing it into four areas: youth, growth engines, regions and talent.
What the government did not say is how large the fund will be, when it launches, or how “long-term trends” in tax revenue will be calculated. Those are the details that decide whether it is an endowment or an accounting line.
A budget written on cyclical profits is a bet that the cycle holds. Memory has crashed before, and the profits funding this plan come from two companies selling into a single wave of AI infrastructure spending.
The boom is also already distorting things closer to home, with the chip rally pressuring Korea’s bond market and record chip bonuses flagged as an inflation risk by economists. An expansionary budget on top of that is a choice, not a neutral act.
The government will publish the full 2027 budget bill later this year, when the restructuring targets stop being a headline figure and start naming programmes. That is when the 50 trillion won will get tested.
