Gov't to pour W3.4tr into semiconductors, expand oil reserves by 20 million barrels

The government plans to invest 3.4 trillion won ($2.48 billion) in the semiconductor industry next year to maintain South Korea's technological edge, while sharply bolstering energy and resource security — including expanding oil storage capacity by 20 million barrels — in response to persistent instability in the Middle East.

The Cabinet approved the Ministry of Trade, Industry and Energy's 2027 budget proposal at a Cabinet meeting held at Cheong Wa Dae on Tuesday.

The ministry's budget for next year stands at 13.26 trillion won, up 3.82 trillion won, or 40.5 percent, from this year's base budget of 9.43 trillion won.

The ministry said the figure represents the largest budget and the highest growth rate since it was established in its current form — incorporating the energy portfolio — in 2013.

The newly created Ministry of Climate, Energy and Environment, which took over the energy functions from the trade ministry, has been allocated roughly twice that amount — 25.73 trillion won — for next year.

To sustain South Korea's leadership in semiconductors, the ministry plans to more than double its semiconductor-related budget, from 1.3 trillion won to 3.4 trillion won.

The investment is divided broadly into two areas: building production infrastructure and fostering a technology ecosystem. For production infrastructure, 1.5 trillion won of the 2.6 trillion won semiconductor special account will go to the Honam semiconductor cluster, with total support over the next four years projected to reach 6 trillion won.

In the Greater Seoul area, the government will support infrastructure investment to accelerate early operation of fabrication plants in Yongin and Pyeongtaek.

The government will also actively support the relocation of a military airfield in Gwangju — designated as the site for the Honam semiconductor cluster — to enable ground-breaking on the cluster as soon as possible.

Some 1.3 trillion won will go toward building the technology ecosystem, up 200 billion won from the 1.1 trillion won allocated this year.

The focus will be on securing core technologies, including advancing domestically developed AI semiconductors, and on cultivating talent.

The government will provide 20 billion won to develop "K-AI semiconductor" technology that integrates and optimizes domestic NPUs with AI models and services, and will invest 48 billion won in state funds to build a public-private "shared fab" for prototyping and demonstrating compound semiconductors.

The government will also support the training of 670 specialized personnel for the southern semiconductor innovation belt and 1,320 semiconductor design specialists, including in AI semiconductors.

A total of 2.1 trillion won in fiscal resources will go toward power, water and industrial complex infrastructure essential to the early development of semiconductor industrial parks.

Of that, 1.5 trillion won is earmarked for a "power grid sprint," with preemptive investment in underground transmission lines, high-voltage substations and other power infrastructure.

The government will inject 500 billion won into Korea Electric Power Corporation to strengthen its capacity to invest in the power grid. An additional 400 billion won will support surging demand for industrial water.

For the Honam semiconductor industrial complex, 119.6 billion won has been set aside in next year's budget toward a target of supplying 1.33 million tons of water per day by 2032. Another 8.1 billion won will go toward water supply for advanced industries in the Chungcheong region.

The government will also inject 250 billion won into the Korea Water Resources Corporation to bolster its investment capacity. At the Saemangeum industrial complex, 200 billion won will be used to develop long-term lease land and a shared logistics center, with continued support for road and rail networks.

The economic security budget — aimed at protecting key industries from chronic supply chain disruptions — will more than quadruple from 600 billion won this year to 2.5 trillion won.

The most notable feature is the creation of a 1.4 trillion won "resource security fund" for long-term investment in oil, critical minerals and other strategic resources.

To strengthen the country's ability to respond to oil supply crises, 56.8 billion won will be invested to expand oil storage capacity by 20 million barrels. A further 200 billion won will increase stockpile volumes by 2 million barrels.

The government will also provide full backing for the procurement of rare earths and other critical minerals essential to advanced industries, with 93.4 billion won allocated for acquisition and 10.6 billion won for building recycling and recovery facilities.

To secure overseas production bases for use in emergencies, the government will strengthen overseas supply chain investment through 200 billion won in local equity stakes and the establishment of new overseas subsidiaries.

The ministry has set aside 1.45 trillion won in next year's budget on the assumption that the oil price ceiling scheme will remain in effect through the fourth quarter.

Oh Seung-cheol, the ministry's planning and coordination chief, said the amount was budgeted as a fourth-quarter settlement payment, adding that if the oil price ceiling scheme ends before then, the funds will be left unspent.