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

South Korea is set to establish a new fund, the Future Response Fund, to leverage tax windfalls from its booming semiconductor industry and invest in the country's future growth sectors, including artificial intelligence, according to the budget ministry. The fund will be financed primarily by tax revenue surpassing a benchmark based on the average growth in domestic tax receipts over the past decade. This accumulated excess tax revenue could prove beneficial during periods of weaker revenue.

The primary objectives of the fund are to support younger generations in finding employment, purchasing homes, and starting families, as well as to invest in AI, regional development, and talent development. South Korean chipmakers like Samsung Electronics and SK Hynix have witnessed a surge in earnings due to the AI boom, creating a high demand for chips.

While the official size of the fund remains undisclosed, South Korean media reports suggest it could potentially exceed 100 trillion won ($72.28 billion), based on government projections for next year's tax revenue and additional inflows. The proposed youth programs will focus on employment, housing, asset building, marriage, and childbirth, while investment in growth industries will prioritize AI and other strategic technologies.

President Lee Jae Myung has expressed a commitment to expanding opportunities for young people as the nation confronts low birth rates, housing affordability issues, and labor market challenges. Government data revealed that the youth unemployment rate increased to 6.8% in July, and Lee recently cautioned that the proliferation of AI could further exacerbate job prospects for younger workers.

The Future Response Fund is also linked to an education funding overhaul, which aims to redirect resources towards talent development, higher education, and lifelong learning. The government intends to present related legislation to parliament alongside its 2027 budget proposal next month.