South Korea Prepares Rp 62 Trillion Budget to Tackle Global Crisis
The South Korean government is ready to disburse an investment fund of 5 trillion won (approximately Rp 62 trillion) specifically to support the national semiconductor sector. This fund is targeted at strengthening companies developing materials, components, equipment, and fabless chip design firms.
This aggressive step comes as South Korea accelerates the construction of new chip manufacturing hubs across the country. South Korea appears to be seizing significant opportunities as the chip industry experiences rapid growth.
The world is facing a chip shortage crisis that has impacted various sectors. Chip prices have soared due to surging demand for artificial intelligence (AI) technology development. Insufficient supply to accommodate market demand has made chips a scarce commodity. Many consumer electronics manufacturers have been forced to raise product selling prices due to the increase in chip costs.
In addition to the substantial fund allocation for chip development, the South Korean government will also provide an additional 5 trillion won in trade finance facilities for industry suppliers. This was conveyed by South Korean Presidential Chief of Staff Kang Hoon-sik during a press conference following a limited meeting led directly by President Lee Jae Myung, as reported by Reuters on Tuesday.
This series of policies is part of a semiconductor mega-project inaugurated by President Lee last June. In this giant project, technology giants such as Samsung Electronics and SK Hynix—along with their supplier networks and local governments—are expected to pour in a total investment exceeding US$576 billion. This massive investment is allocated for the construction of new chip production facilities, including major fabrication plants in the southwestern region of South Korea.
"The government will establish a new semiconductor fund worth about 5 trillion won focusing on potential material, component, and equipment companies, as well as fabless firms," Kang stated. South Korea is also preparing a 10-year collaboration support programme worth 1 trillion won. This programme is designed to bridge cooperation between conglomerates (chaebol) and small-to-medium scale suppliers in the research, testing, and production chain for chips.
To cut bureaucracy, the government will push for the passage of the Mega Special Zone Act in parliament this year. This regulation will accelerate the licensing process, environmental impact analysis, and the construction of supporting infrastructure. In a meeting also attended by the bosses of Samsung and SK, President Lee urged the Ministry of Defence to immediately relocate the military airbase in Gwangju by mid-2028 at the latest. The 8.3 million square metre site will be transformed into a national semiconductor industrial zone.
To support the operations of chip factories, which are highly demanding in terms of power and water, Kang confirmed that supporting infrastructure availability will be completed on schedule. For the Gwangju-South Jeolla cluster, authorities are targeting a water supply of up to 650,000 tonnes per day by 2030, sourced from wastewater recycling and nearby dams. The Yongin cluster, a major chip production hub south of Seoul, will be supplied with a massive 14.7 gigawatts of electricity by 2041 through cogeneration power plants, LNG, and inter-regional supply.
Overall, projects worth more than 350 trillion won across various regions of South Korea are scheduled to begin construction or factory expansion this year. Additionally, research and development projects worth 57 trillion won are also commencing execution. The Lee administration has made chip capacity expansion a main pillar of the national industrial strategy, assessing that existing production zones in Yongin and Pyeongtaek will not be able to meet the explosion in global chip demand driven by the rapid development of AI technology.