The government will create a Semiconductor Special Account in 2027 to manage the semiconductor support budget as a separate funding pool. The total size will be 2.6 trillion won, of which 2.1 trillion won will fall under the Ministry of Trade, Industry and Energy.

The ministry said on Monday it had drafted its 2027 budget proposal at a record 13.26 trillion won. That is up 3.82 trillion won, or 40.5 percent, from the 2026 main budget of 9.43 trillion won. The ministry said it would be the largest ever budget and the highest growth rate since the ministry was launched, including the energy sector.

Adding 911.8 billion won for seven ministry projects allocated to the Future Response Fund, which will be newly created under expenditure by the Office of Planning and Budget, brings the effective budget to 14.17 trillion won. That is an increase of 4.73 trillion won, or 50.2 percent, from 2026.

The Semiconductor Special Account is a fiscal instrument to be newly created in this budget proposal, along with a Resource Security Fund. The ministry said it is creating the special account as an integrated support system to help South Korea become a leading semiconductor power. From 2027, key semiconductor support programmes will receive funding through the special account. The Resource Security Fund will be set at 1.4 trillion won in 2027 and will be used to respond to supply chains for oil and key minerals.

The ministry newly allocated 1.5 trillion won to an integrated fiscal support project to build the southwest semiconductor cluster. It is part of special incentives tied to administrative integration of Gwangju and South Jeolla. The ministry said it will continue swift fiscal support at the government level in line with semiconductor companies' investment decisions in the Honam region.

The 1.5 trillion won accounts for 71 percent of the ministry's 2.1 trillion won portion of the Semiconductor Special Account and 11.3 percent of the ministry's 13.26 trillion won 2027 budget proposal. It is the largest amount among newly allocated projects listed in the material. The material did not specify whether individual projects would be allocated to the special account.

Increases in the existing semiconductor technology development budget were limited. The advanced semiconductor industry technology development programme (R&D) rose by 6.9 billion won to 54.1 billion won in 2027 from 47.2 billion won in 2026. The ministry said it will continue to support development of core technologies to secure high-growth markets such as next-generation system semiconductors and defence semiconductors.

A budget for AI data centres (AIDC) was also created. The proposal newly allocated 39.0 billion won for development of core materials, parts and equipment technologies for AIDC, including next-generation power and cooling and air-conditioning. It also set aside 4.0 billion won for an advanced industry academy to train personnel to build and operate AIDC.

◆To be submitted to parliament on Sept. 3, details of special account not disclosed

The overall budget increase was driven by non-R&D items. Non-R&D spending rose 97.1 percent to 8.31 trillion won in 2027 from 4.22 trillion won in 2026. R&D spending fell 5.2 percent to 4.94 trillion won from 5.22 trillion won over the same period. Including the ministry budget allocated to the Future Response Fund and the Climate Fund, R&D rises 7.3 percent to 5.59 trillion won.

The ministry's projects allocated to the Future Response Fund were concentrated in manufacturing AI. The proposal newly allocated 120.0 billion won for development of a full-stack AI factory and manufacturing AI foundation models, 290.0 billion won for AI solution development using manufacturing tacit knowledge, and 115.8 billion won to build and operate a national manufacturing data library.

Funding will be secured by reallocating spending through a restructuring of existing projects. The ministry said it carried out expenditure restructuring of about 1.5 trillion won, a 16 percent cut, focusing on low-performing and inefficient projects, and used the savings for manufacturing AI conversion, mega projects, region-led growth under the "5 hubs, 3 special zones" initiative, and to strengthen industrial and resource security.

By category, support for manufacturing AI (M.AX) and mega projects posted the biggest rise, increasing 128.5 percent to 3.73 trillion won from 1.63 trillion won. Spending to strengthen industrial and resource security increased 84.5 percent to 3.68 trillion won from 2.00 trillion won, while region-led growth under the "5 hubs, 3 special zones" initiative rose 62.0 percent to 2.07 trillion won from 1.28 trillion won. Spending to foster advanced industries rose 4.3 percent to 1.24 trillion won from 1.19 trillion won.

The ministry's 2027 budget proposal will be submitted to parliament on Sept. 3. It will then be finalised through reviews by standing committees and the Special Committee on Budget and Accounts, and approval by a plenary session.