South Korea plans chip windfall fund to back youth, AI investment

South Korea is set to establish a new fund to capitalize on tax windfalls generated by its semiconductor industry and invest in future growth sectors like artificial intelligence, according to the country's budget ministry. The proposed "Future Response Fund" will allocate resources to assist young people in securing employment, purchasing homes, and starting families, as well as supporting investments in AI, regional development, and talent development.

Mainly funded by tax revenue exceeding a benchmark established by the average growth in domestic tax receipts over the past decade, the fund will accumulate surplus tax revenue during prosperous years to be utilized during leaner periods.

South Korean tech giants Samsung Electronics and SK Hynix have experienced substantial earnings growth due to the AI boom, which has created a high demand for chips. While the official size of the fund has not been disclosed, South Korean media suggests it could surpass 100 trillion won ($72.28 billion) based on government projections for next year's tax revenue and potential inflows from other sources.

The plan intends to support youth programs that cater to employment, housing, asset building, marriage, and childbirth. Meanwhile, investments in growth industries will primarily focus on AI and other strategic technologies. South Korean President Lee Jae Myung has committed to expanding opportunities for younger generations amid low birth rates, housing affordability challenges, and labor market issues.

Government data revealed that the youth unemployment rate climbed to 6.8% in July, with President Lee recently warning that the proliferation of AI might further jeopardize job prospects for younger workers.

The Future Response Fund is also connected to an educational reform aimed at redirecting more resources towards talent development, higher education, and lifelong learning. Government officials plan to introduce the necessary legislation to South Korea's parliament alongside their 2027 budget proposal next month.