South Korea's Record AI and Chip Budget

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# South Korea targets 'world's highest performance' sovereign AI model in record new budget

Published Mon, Nov 2 2026 1:02 AM EST


[Lim Hui Jie](https://www.cnbc.com/lim-hui-jie/)[@in/hui-jie-lim-a7371176/](https://linkedin.com/in/hui-jie-lim-a7371176/)


[Jenny Lee](https://www.cnbc.com/jenny-lee/)[@in/jenny-lee-102020a8](https://linkedin.com/in/jenny-lee-102020a8)

[WATCH LIVE](https://www.cnbc.com/live-tv/)

Key Points

* South Korea plans to raise total spending for 2027 by 12.8% to 820.9 trillion won, with a major investment push for semiconductors, physical AI and AI data centers. * Lee pledged 4.7 trillion won for a sovereign AI model and plans to train 2,000 specialists in semiconductor design and regional chip industries. * South Korea is within reach of $1 trillion in annual exports, citing strong performance in key industries including semiconductors.

NEW YORK, UNITED STATES - SEPTEMBER 22: President of South Korea Lee Jae Myung addresses the 81st session of the United Nations General Assembly, which brings together leaders and senior representatives of UN member states in New York, United States, on September 22, 2026.

Anadolu | Anadolu | Getty Images

South Korean President Lee Jae Myung unveiled the country's largest ever budget on Monday, pledging to "boldly invest in AI and future growth engines."

[Speaking to the National Assembly](https://www.youtube.com/watch?v=7i_0jYPo7zo)on Monday, Lee said total spending for 2027 would rise 12.8% to 820.9 trillion won ($610.14 billion), including 21.3 trillion won for semiconductors, physical AI and AI data centers — nearly double the 2026 level.

A separate 4.7 trillion won will go toward developing a sovereign AI model with what Lee described as the "world's highest performance."

The government also plans to invest heavily into talent, including training 2,000 specialists to "lead semiconductor design and the regional semiconductor industry," while expanding AI education for students, job seekers and existing workers.

South Korea [has set up](https://www.cnbc.com/2026/09/16/samsung-sk-hynix-ai-boom-students-university-programs.html)university "contract departments," where students can enroll in company-linked degrees that offer pathways to jobs at firms like Samsung Electronics and SK Hynix before graduation.

Companies help design courses, provide financial support and recruit qualifying graduates.

The record spending plan comes as the [International Monetary Fund](https://www.imf.org/en/countries/kor) forecasts South Korea's economy will grow 3.3% in 2026, its fastest pace since the post pandemic rebound in 2021.

Lee said the higher spending would result in "virtually no net increase in government debt," with newly issued bonds used to repay existing debt.

The budget also increases spending on defense and social security spending for the youth. Defense expenditure is set to rise 8.2% to 73.3 trillion won.

"We will rapidly transform into a smart, elite, and powerful military by establishing a hybrid manned and unmanned system based on AI, robots, and drones," Lee said.

South Korea's strong economic growth has been driven largely by semiconductor exports as global demand for computing power rises with the AI boom.

Exports surged 93.7% from a year earlier to a record $115.3 billion in October, according to data released Sunday by the Korea Customs Service.

Shipments totaled $930 billion in the first 10 months of 2026, surpassing the $900 billion mark for the first time.

The country posted a $42.5 billion trade surplus in October, with imports rising 36% year on year to $72.8 billion.

Lee said South Korea was within reach of $1 trillion in annual exports, citing strong performance in key industries including semiconductors.

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