"Super Budget" of 800 Trillion Won Plus Alpha... New Semiconductor Special Account, Record EV Subsidies

[Financial News] Next year's budget, which will be drawn up at a record scale of 800 trillion won plus alpha (α), will be concentrated on three mega projects and five key areas: artificial intelligence (AI), aerospace, youth, polarization, and safety. In particular, the government will focus on investment in advanced industries such as semiconductors and electric vehicles. The plan includes the creation of a special semiconductor account and the largest-ever expansion of EV subsidies.
The Democratic Party of Korea and the government shared this budget direction at the consultation on the budget bill on the 25th. Kwon Chil-seung, chair of the party's policy committee, told reporters after the meeting, "The budget will play an active role by making strategic investments for South Korea's great leap forward and major transformation."
According to Jung Tae-ho, secretary of the Special Committee on Budget and Accounts of the National Assembly, a special semiconductor account will be created in connection with the three mega projects, including a 800 trillion won semiconductor investment in Honam. The government will also make equity investments in Korea Electric Power Corporation (KEPCO) and Korea Water Resources Corporation (K-water) to secure power and water supplies. The goal is to support comprehensive investment in the Yongin and Honam semiconductor clusters, research and development (R&D), and talent development.
A Future Response Fund worth more than 100 trillion won will also serve as a stable investment base. Park Hong-keun, Minister of Planning and Budget, explained, "To avoid spending the increased tax revenue from the semiconductor boom on one-off expenditures, we will establish the Future Response Fund and use it as a strategic investment platform to support a rebound in potential growth and as a fiscal stabilization tool to ease tax revenue volatility."
President Lee Jae-myung also emphasized the active role of fiscal policy, calling it a "productive fiscal strategy." At the State Council of South Korea meeting that day, he said, "Now is not the time to make the mistake of being fixated on short-term fiscal figures," adding, "We need the wisdom to turn today's 10,000 won into 100,000 won tomorrow, and then into 1 million won."
To foster the AI industry, the government will support the development of Physical AI that reflects manufacturing know-how, accelerating AI transformation. It will provide AI solutions by digitizing manufacturing tacit knowledge and supporting the robots and equipment needed. It will also support the supply of 10,000 GPUs for the development of frontier AI models.
Beyond semiconductors and AI, investment will also be made in the "NEXT 10 sectors." A key example is the record expansion of EV subsidies to drive the energy transition. The plan also includes pilot zones and support for autonomous vehicles, as well as R&D support for a 2030 moon landing and expanded financing for venture companies.
A "growth engine special subsidy" will also be introduced for companies relocating to regional areas. If an anchor company moves to the provinces, the government will support its facility investment. To improve living conditions, it will provide a "regional future growth support grant" and create better medical and educational conditions through a special account for essential regional healthcare and full tuition support for regional national universities.
[email protected] Kim Yoon-ho, Song Ji-won, Choi Jong-geun Reporter