March 15, 2025

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South Korean opposition leader Lee Jae-myung’s recent proposal to establish a big tech company akin to Nvidia, but one that is state-backed and profit would be distributed among citizens, has sparked a heated debate among business and political circles here.

“If a company like Nvidia were to be established (in Korea), with 70 percent of shares privately owned and 30 percent distributed among citizens, wouldn’t a society emerge that doesn’t necessarily have to rely on taxes?” Lee, head of the main opposition Democratic Party of Korea, said during a YouTube broadcast by the party’s think tank The Institue for Democracy on March 2. His suggestion was that if a sovereign fund or the government owned shares in big tech companies, wealth could be shared with the public.

Lee’s remarks, dubbed "K-Nvidia," drew sharp criticism from the conservative bloc, condemning the proposal as “anti-business” and “unrealistic.”

Rep. Ahn Cheol-soo of the People Power Party, who was once a computer entrepreneur, questioned the feasibility of the plan, attacking Lee's remarks as "ignorant of the startup and development ecosystem of a company."

"When (Lee) said to divide the shares, it means dividing Nvidia's market capitalization of $3 trillion by one-third, which is 1,450 trillion won. This amount is larger than the size of the entire National Pension Service of Korea," said Ahn on Facebook. "Even if Nvidia were a state-owned enterprise, dividing a national asset worth 1,450 trillion won among all citizens is fiscally impossible."

Rep. Lee Jun-seok of the minor conservative New Reform Party also took to Facebook, arguing that Lee Jae-myung was fundamentally anti-business and anti-market.

"Why would any company want to do business in Korea if a leader insists that when a company succeeds, it should not only pay corporate taxes, but also distribute 30 percent of its shares to the public,” he said.

Meanwhile, Lee Jae-myung’s liberal bloc defended the proposal, citing Taiwan Semiconductor Manufacturing Co. and South Korea’s steel giant Posco as examples of when government involvement led to corporate success.

Rep. Kim Byung-joo of the Democratic Party argued during the party’s Supreme Council meeting on March 5 that nations around the world are supporting AI strategy industries through sovereign wealth funds.

“The US and Saudi Arabia are making aggressive strategic investments, and Taiwan’s TSMC and Korea’s Posco are examples of government-backed strategic industries,” Kim said.

Lee Jae-myung also reiterated his stance at the meeting, stating, “TSMC had a 48 percent government stake, yet I cannot understand why some believe South Korea should refrain from investing in future cutting-edge industries.”

Backing up Lee’s remarks, the Democratic Party of Korea on March 6 announced plans to establish a 50 trillion won (34.35 billion) national wealth fund to support advanced strategic industries.

The fund will include contributions from the public, corporations, the government and pension funds, with investments primarily directed at stocks and bonds issued by firms in high-tech strategic industries, according to Rep. Jin Sung-joon, the Democratic Party’s policy committee chair.

While critics have dismissed Lee’s proposal as abrupt and unrealistic, especially coming from a potential presidential candidate, many have been calling for more government involvement in the capital-intensive strategic industries.

Last December, the National Academy of Engineering of Korea proposed creating a Korea Semiconductor Manufacturing Co., a government-backed foundry modeled after TSMC, by investing about 20 trillion won.

“We need to create KSMC, a public R&D fab that supports domestic fabless companies, as well as materials, components, equipment and packaging firms,” Kwon Seok-joon, professor of chemical engineering at Sungkyunkwan University, said in December.

“An investment of 20 trillion won in this initiative could generate an economic impact of 300 trillion won over the next 20 years.”

TSMC was founded in 1987 with a $100 million investment from the Taiwanese government, which initially held a 48 percent stake in the company. Over time, the government gradually reduced its ownership as TSMC became profitable and internationally competitive. Today, the Taiwanese government holds only 6.4 percent of TSMC shares through its National Development Fund.

South Korea has also seen government-backed companies play a crucial role in post-war economic development. Posco, established in 1968, was initially funded by the South Korean government using Japanese compensation funds from the 1965 treaty that normalized relations between Seoul and Tokyo.

The government gradually privatized Posco, fully divesting in 2000. However, it still exerts influence over the company through the National Pension Service, which remains Posco Holdings’ largest shareholder.

State-owned companies still exist in Korea, but most of them are primarily involved in infrastructure or public goods that require long-term investment and stable management.

In recent years, direct government investment in private companies has been largely avoided, though there are no legal barriers preventing it. The government usually supports private businesses through government-backed venture capital and indirect funding through state-run funds.

Then, as Lee Jae-myung suggested, is it possible for the government to own 30 percent stake in a high-tech company?

Securing a 30 percent stake at the early stages of a company is possible, but maintaining such a level of ownership will become more challenging as the firm grows.

Companies typically raise capital by issuing new shares to private investors or going public through an IPO, which dilutes existing ownership holdings.

For example, TSMC, whose market cap is at around $885 billion as of Tuesday, saw the Taiwanese government’s stake shrink from 48 percent at the inception to just 6.43 percent due to stock dilution.

For comparison, major US big tech entrepreneurs own stakes of less than 10 percent in the companies they founded due to similar dilution effects, including Mark Zuckerberg’s Meta, Larry Page’s Alphabet, Jeff Bezos’ Amazon and Jensen Huang’s Nvidia.

Maintaining a 30 percent government stake would require continuous reinvestment, which could be pricey and politically challenging as well, observeers say.

“If you understand the growth cycle of IT companies even a little, you will know how unrealistic the idea of a ’30 percent public share’ is,” Rep. Lee Jun-seok said.

“In fact, (Nvidia founder and CEO) Jensen Huang’s share has gradually diluted from 20 percent from the early days of business (in 1993) and following the IPO to a current level of 3.5 percent. As global companies like Nvidia grow, the founder’s share naturally decreases, but the idea that the government will secure 30 percent for ‘citizens’ does not understand the corporate ecosystem at all.”

Another remaining question is whether profits from the government's stake in tech companies could replace tax.

Critics argue that such expectations are unrealistic, considering the low dividend yield rates among tech companies. TSMC’s dividend yield currently stands at 1.34 percent, which is on the higher side among tech firms, and Nvidia is at just 0.03 percent.

Tech firms generally have low dividend yields because they opt for reinvesting profits into growth, R&D and acquisitions instead of returning cash to shareholders.

Many also have inflated valuations based on expectations of future earnings that are greater than their current profits, which also pushes down the yield. Some companies, including Tesla, don’t pay dividends at all.

For context, Taiwan’s government holds a 6.4 percent stake in TSMC, valued at approximately $56.88 billion. At a 1.65 percent dividend yield, the government’s annual dividend income is only about $937.52 million.

In contrast, South Korea’s total tax revenue for last year was 336.5 trillion won ($230.9 billion) -- around 250 times the annual dividend income Taiwan receives from TSMC.

This means that if South Korea held a substantial stake in a successful tech firm, the returns would be insufficient to offset anything more than a small fraction of tax income.

By Ahn Sung-mi (sahn@heraldcorp.com)