South Korea plans to propose record government spending of more than 800 trillion won (US$531 billion) for 2027, supported by stronger tax revenue from the country’s semiconductor industry.

Budget Minister Park Hong-keun said on Monday that the plan would be funded through higher tax receipts and spending cuts, including what the government described as its largest expenditure restructuring to date.

The proposed budget would exceed this year’s 727.9 trillion won spending plan, excluding supplementary budgets.

Chips, data centres, and physical AI

The government will prioritise investment in semiconductors, AI data centres and physical AI, including robotics and industrial applications.

An inter-ministerial task force is supporting private data centre investment through administrative and regulatory measures. Plans also include developing domestic technologies, building large-scale testbeds and creating industry clusters.

“To support this, we plan to launch the ‘Artificial Intelligence Data Centre (AIDC) Alliance’ and establish a cooperation framework among domestic companies.”

South Korea is also targeting a leading position in physical AI by 2030. The programme will support domestic platforms, data development and testing across manufacturing, defence, care services, agriculture and public security.

Starting this year, the government plans to develop world models capable of generating large volumes of synthetic data and expand physical AI technologies already tested at Korean manufacturing sites.

For semiconductors, the government plans to support next-generation technologies and the wider supply chain alongside an estimated 957 trillion won in private fab investment.

“We will complete a self-contained supply chain ecosystem by fostering domestic materials, parts, and equipment (Sobujang), packaging, and foundries.”

Support will also target on-device AI chips, compound power semiconductors and defence semiconductors. Proposed legislation, including the Mega Special Zones Act and Semiconductor Special Act, would support new fabs and semiconductor clusters.

In robotics, the government will invest in data, AI models and components, while using public procurement to create early demand and encourage mass production.

It also aims to develop production hubs in Saemangeum, Daegyeong and the southeast, including support for robots used in hazardous industrial processes.

Power, water, and regional hubs

Climate, Energy and Environment Minister Kim Sung-hwan outlined plans to expand electricity and water infrastructure for semiconductor, AI data centre and physical AI projects.

The energy strategy includes wider deployment of solar power, including rooftop systems at factories, alongside support for offshore wind and the repowering of existing onshore wind farms.

South Korea also plans to use battery energy storage systems to support grid stability and move towards a more decentralised electricity network based on local generation and consumption.

For water supply, the government is considering broader use of existing dams, upgrades to regional water networks and the reuse of treated wastewater at industrial complexes.

Land, Infrastructure and Transport Minister Kim Yun-duk also outlined plans to develop semiconductor hubs in Honam and Yongin.

The Honam plan centres on a high-tech industrial city at the Gwangju Military Airport site, combining industrial, research and residential facilities. The government said it was intended to help translate 800 trillion won in planned corporate semiconductor investment into regional growth.

Yongin would remain an established core semiconductor hub.

The government plans to accelerate projects through measures including preliminary feasibility study exemptions and fast-track licensing, while expanding industrial, housing and transport infrastructure.

Its plan calls for site preparation at the Yongin Semiconductor National Industrial Complex to begin this year. Samsung has separately said it now aims to start operations at its first fab there in 2029, earlier than the previous 2030–2031 timetable.

Related infrastructure projects include the expansion of National Highway 45 and the development of nearby public housing.