Supplementary budget aims to stabilize economy, revive domestic demand and cushion global shocks
South Korea raised its semiconductor support package to 33 trillion won ($23.17 billion) on Tuesday, stepping up efforts to bolster key strategic sectors as global trade tensions escalate. The government also approved a 12 trillion won supplementary budget to support the broader economy.
“We will ramp up chip industry support to 33 trillion won, with 4 trillion won in fiscal spending to be injected by 2026,” Finance Minister Choi Sang-mok said at a ministerial meeting on economic affairs on Tuesday.
The announcement marks a significant jump from the 26 trillion won package initially announced in June last year as part of Seoul's efforts to strengthen its semiconductor ecosystem.
Choi said the increased support is intended to help the industry withstand growing global trade frictions, especially due to the recently announced US tariffs.
“The US has placed a 90-day reprieve on its 'reciprocal tariffs,'” Choi said. “This offers a crucial opportunity for our companies to power up their competitiveness amid an intensifying global trade war.”
Earlier this month, the US imposed “reciprocal tariffs” on key trading partners, citing trade and non-tariff barriers faced by American firms. South Korea faces a 25 percent levy, originally set to take effect April 9. However, Washington granted a three-month grace period for countries that chose not to retaliate. The US also flagged industry-specific tariffs targeting semiconductors and biopharmaceuticals.
Tuesday’s announcement includes new infrastructure spending, with the government covering 70 percent of the corporate share of the 1.8 trillion won needed to bury transmission cables for semiconductor clusters in Yongin and Pyeongtaek, south of Seoul.
The government will also increase funding for “specialized complexes for advanced strategic industries,” raising its contribution from 15-30 percent to 30-50 percent. For mega-clusters with investments exceeding 100 trillion won, the cap on state support will double from 50 billion won to 100 billion won.
Policy financing will be expanded as well. A new subsidy program — backed by 70 billion won from the supplementary budget — will support smaller firms producing semiconductor materials, parts and equipment. On top of this, the government will offer an additional 3 trillion won in low-interest loans to chipmakers, raising the total to 20 trillion won through 2027.
New initiatives will be introduced to attract top-tier talent. The government plans to roll out a research and development training program in 2026 for domestic master’s and doctoral students, while also launching inbound programs to connect global experts with local firms for recruitment and joint technology development.
Choi, also serving as Korea's economic deputy prime minister, announced the country's first supplementary budget of the year. "The government will draft an 'essential' supplementary budget of around 12 trillion won, about 2 trillion won more than the initially proposed 10 trillion won," Choi said during the ministerial meeting.
More than 4 trillion won of the supplementary budget will go toward shoring up key industries affected by trade tensions and advancing the artificial intelligence sector. This includes about 500 billion won for the 33 trillion won semiconductor support package.
A significant portion, around 1.8 trillion won, will be allocated to the AI sector, Choi noted. This will fund the immediate supply of over 3,000 graphics processing units and the securing of an additional 10,000 units by year-end to support the development of Korea’s own AI model. Additionally, the "AI Innovation Fund," a government-backed initiative focused on AI, will more than double in size to 200 billion won.
Alongside technology and semiconductors, the biopharmaceutical sector also faces looming US tariff hikes, prompting the government to direct part of the extra budget toward support measures. Choi said the government will double export vouchers for affected firms, with biopharmaceutical companies among the beneficiaries.
Of the 12 trillion won, 3 trillion won will be allocated for disaster recovery, including aid for mountains and villages scorched by recent wildfires. The remaining 4 trillion won will go toward stabilizing livelihoods as the country struggles with weak domestic demand.
The Finance Ministry plans to finalize the supplementary budget proposal and submit it to the National Assembly in the coming days.
“Timing is everything for supplementary spending,” Choi said, adding, “I earnestly ask for bipartisan support to ensure that it gets passed swiftly."
By Choi Ji-won (jwc@heraldcorp.com)
