South Korea proposes 2027 budget for chips, physical AI and sovereign model

South Korea's proposed 2027 budget sets aside 21.3 trillion won for semiconductors, physical AI and AI data centers, nearly double the 2026 level. A further 4.7 trillion won would go toward developing a sovereign AI model. President Lee Jae Myung unveiled the plan to the National Assembly on Monday. He described it as the largest budget the country has ever proposed and pledged to "boldly invest in AI and future growth engines." CNBC reported that total spending for 2027 would rise 12.8% to 820.9 trillion won, or $610.14 billion.

Lee's speech also set aside money for talent. That includes training 2,000 specialists to "lead semiconductor design and the regional semiconductor industry," and expanding AI education for students, job seekers and existing workers. South Korea has also set up university "contract departments." In these, students enroll in company-linked degrees that lead to jobs at firms such as Samsung Electronics and SK Hynix before graduation. Companies help design courses, provide financial support and recruit qualifying graduates.

The spending comes against a strong export backdrop. Exports rose 93.7% from a year earlier to a record $115.3 billion in October, according to data the Korea Customs Service released on Sunday. Shipments for the first ten months of 2026 totaled $930 billion, passing $900 billion for the first time. The International Monetary Fund 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 produce "virtually no net increase in government debt," because newly issued bonds would be used to repay existing debt. Defense spending is set to rise 8.2% to 73.3 trillion won. Lee also said the military would move toward "a hybrid manned and unmanned system based on AI, robots, and drones."

These are proposals. They must still pass through the National Assembly's budget process before any of the money is spent.