South Korea Creates $72B Chip Windfall Fund to Support Youth and Fuel AI Investment

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

SEOUL, Aug 21 (Reuters) - South Korea plans to create a new fund to channel tax windfalls from the country's semiconductor boom into supporting younger generations and invest in future growth industries such as artificial intelligence, the budget ministry said on Friday. The proposed "Future Response Fund" would finance programmes aimed at helping young people find jobs, buy homes and start families, while also supporting investments in AI, regional development and talent development, according to a ministry press release. The fund would be financed mainly by tax revenue exceeding a benchmark ⁠based on the average growth in domestic tax receipts over the past decade. It would accumulate excess tax revenue in strong years that could later be used to help cushion periods of weaker revenue, according to the ministry. South Korean chipmakers Samsung Electronics and SK Hynix have seen their earnings soar as the AI boom creates insatiable demand for chips. The government did not provide an official estimate of the fund's size. South Korean media said it could exceed 100 trillion won ($72.28 billion) based on ⁠government projections for next year's tax revenue and expected inflows from other sources. Under the plan, youth programmes would support employment, housing, asset building, marriage and childbirth, while investment in growth industries would focus on AI and other strategic technologies. President Lee Jae Myung has pledged ⁠to expand opportunities for young people as the country grapples with low birth rates, housing affordability concerns and labour market challenges. Government data showed the youth unemployment rate rose to 6.8% in ⁠July, while Lee recently warned that the spread of AI could further cloud job prospects for younger workers. The fund is also tied to an overhaul of ⁠education funding that would redirect more resources toward talent development, higher education and lifelong learning. The government plans to submit related legislation to parliament alongside its 2027 budget proposal next month. ($1 = 1,383.5000 won) Reporting by Kyu-seok Shim Editing by Ed Davies Our Standards: The Thomson Reuters Trust Principles., opens new tab

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

The proposed "Future Response Fund" would finance programmes aimed at helping young people find jobs, buy homes and ⁠start families, ⁠while also supporting investments in AI, regional development and talent development, according to a ministry press release. South Korea plans to create a new fund to channel tax windfalls from the country's semiconductor boom into supporting younger generations and invest in future growth industries such as artificial intelligence, the budget ministry said on Friday. The proposed "Future Response Fund" would finance programmes aimed at helping young people find jobs, buy homes and ⁠start families, ⁠while also supporting investments in AI, regional development and talent development, according to a ministry press release. The fund would be financed mainly by tax revenue exceeding a benchmark based on the average growth in domestic tax receipts over the past decade. It would accumulate excess tax revenue in strong years that could later be used to help cushion periods of ⁠weaker revenue, according to the ministry. South Korean chipmakers Samsung Electronics and SK Hynix have seen their earnings soar as the AI boom ⁠creates insatiable demand for chips. The government did not provide an official estimate of the fund's size. South Korean media said it could exceed 100 trillion won ($72.28 billion) based on government projections for next year's tax revenue and expected inflows from other sources. Under the plan, youth programmes would support employment, housing, asset building, marriage and childbirth, while investment in growth industries would focus on AI and other strategic technologies. President Lee Jae Myung has pledged to expand opportunities for young people as the country grapples with low birth rates, housing affordability ⁠concerns and labour market challenges. Government data showed the youth unemployment rate rose to 6.8% in July, while Lee recently warned that the spread of AI could further cloud job prospects for younger workers. The fund is also tied to an overhaul of education funding that would redirect more resources toward talent development, higher education and lifelong learning. The government plans to submit related legislation to parliament alongside its 2027 budget proposal next month.

Korea to launch 'future fund' with 'windfall revenue' amid chip boom - The Korea Times

The proposed education reform would replace the current system that automatically allocates 20.79 percent of internal tax revenue plus part of education tax revenue to grants for local education offices, while keeping total grants at least at the previous year's level. Korea will launch the "Future Fund" to promote long-term economic growth, using what the government calls "windfall revenue" from increased tax collection driven by the recent artificial intelligence (AI) boom, the budget ministry said Friday. The Ministry of Planning and Budget unveiled the plan in partnership with relevant government agencies, saying the AI industry has sparked a major transition across various areas, from the economy to social systems, beyond just a technological revolution. "Amid the global chip boom, domestic tax revenue is expected to rise sharply, driven by an increase in corporate tax revenue," the budget ministry said. "We need to use the fiscal capacity secured under the current circumstances as valuable ammunition to take the lead in the global competition for technological supremacy," it added. The budget ministry introduced the concept of "windfall revenue," referring to tax revenue exceeding its long-term trend due to structural economic changes or significant economic fluctuations, such as an industrial supercycle. The government said the concept differs from surplus tax revenue, which refers to tax receipts exceeding official forecasts due to unexpected short-term economic fluctuations or forecasting errors. The windfall revenue will be used to finance the Future Fund, while surplus revenue will be used to fund supplementary budgets, repay government debt or make contributions to the fund. The budget ministry said the fund will serve as a strategic investment platform aimed at boosting the country's potential economic growth. "Investment will focus on key areas needed to raise the country's potential growth rate, including youth, growth engines, regional economies and education," the budget ministry said. In detail, the fund will support young people at different stages of their lives, covering areas ranging from employment and housing to marriage and childbirth. It will also support the government's three megaprojects initiative, centered on fostering the AI industry and related areas, such as physical AI, along with the so-called seven future-oriented sectors. The seven sectors are small modular reactors (SMRs), nuclear fusion, renewable energy, quantum technology, aerospace, advanced biology, and supply chains for advanced materials and components. The fund will also serve as a platform for fiscal stability, contributing to greater stability and efficiency in the country's budget management, the ministry said. Korea, meanwhile, will also overhaul its education budget allocation mechanism to better reflect the country's dwindling student population while bolstering higher education. The proposal by the budget ministry will significantly change the current system, under which the government automatically allocates 20.79 percent of internal tax revenue, along with a portion of education tax revenue, to grants for local education offices. According to the government, the number of people aged between three and 17 fell sharply from 8.8 million in 2010 to 5.91 million in 2025, highlighting the need to readjust the education funding mechanism linked to internal tax revenue, which has generally increased despite the demographic decline. "The linkage to internal tax revenue makes it difficult for the government to manage its finances flexibly at the national level, while sharp fluctuations in internal taxes, including corporate tax, have increased volatility in education grants," it said. Accordingly, the budget ministry proposed a new calculation formula reflecting the previous year's grant amount, the three-year average nominal economic growth rate and demographic changes. The government will ensure the total amount of grants does not fall below the previous year's level, it added. The proposal, meanwhile, will be reviewed by the Cabinet on Sept. 1 and submitted to the National Assembly on Sept. 3.