Seoul announces $3.5b fund for domestic chips

South Korea plans to create a new 5 trillion won ($3.5 billion) fund for chipmakers as part of a large-scale investment initiative in artificial intelligence and semiconductors.

The fund will focus on semiconductor materials, parts, equipment, and companies that outsource chip fabrication, Presidential Chief of Staff Kang Hoon-sik said at a media briefing on Monday.

This followed a meeting to review progress on the "three megaprojects" initiative unveiled in June to invest in semiconductor clusters, physical AI, and AI data centers across the country.

"It is important to have preemptive policy design from the very start to ensure that the investment outcomes of megaprojects spread not only to large companies but also to materials, parts, and equipment companies, as well as small — and medium-sized enterprises," said Kang.

Another 1 trillion won will be invested over the next 10 years to foster joint growth in the semiconductor sector.

South Korean President Lee Jae-myung presided over the meeting. At the start of the meeting, Lee said the government should make all-out efforts to implement the large-scale AI and semiconductor investment initiative as soon as possible. This includes improving regulations to ensure swift implementation, he said.

"We are in a situation where we must go beyond being speedy and move with the speed of lightning," Lee was quoted as saying by Yonhap News Agency.

Lee said the ultimate goal of the initiative is to spread the benefits of future industries across the country and the entire community, instead of being limited to certain companies or regions.

Samsung Electronics and SK Hynix, South Korea's two major chipmakers, have pledged to invest a combined 800 trillion won in a chip cluster project in the southwestern region of South Korea.

Also at the meeting, the government said it plans to pass a special law for megaproject zones by the end of this year to expedite licensing and approval procedures, environmental assessments, and infrastructure construction to support the initiative.

Regarding the exemption of the 52-hour workweek system under the special law — a key point of contention — the presidential office said the issue requires discussions with relevant regional communities and labor organizations.

Keeping pace

Kim Jung-kwan, South Korea's minister of trade, industry and energy, said on Aug 6 that it is necessary to apply the exemption within so-called mega special zones to keep up pace in AI and semiconductor development with major countries such as China and the United States.

The South Korean government is also working to significantly expand public procurement of both bipedal and quadrupedal robots to nurture an initial market for the physical AI industry. Efforts will also be made to build infrastructure for producing core components.

South Korea's Special Semiconductor Act, aimed at strengthening and supporting semiconductor industry competitiveness, also took effect on Tuesday.

Analysts see the move as fundamental to shifting national chip support to a state-backed framework, with the government covering 50 percent to 100 percent of key infrastructure costs.

"It will mark a fundamental paradigm shift for South Korea," said Kim Yong-jin, professor of management information systems at Sogang Business School, in an interview with Arirang News.

This is because it transitions the country's chip sector from privately led development to a state-backed system by legally binding the government to share infrastructure costs and streamline administrative processes, said Kim.

kelly@chinadailyapac.com