South Korea plans to establish a historic budget exceeding 800 trillion won, or roughly 530.97 billion dollars, for fiscal 2027. Stronger tax collections from the expanding artificial intelligence chip sector will support the increase, officials announced on Monday.

The decision signals that Seoul intends to deploy semiconductor gains rather than reserve them. The country has debated this approach since proposing a future response fund financed by chip-related taxes earlier this month.

Budget Minister Park Hong-keun outlined the plan at a national fiscal strategy session. It will rely on higher receipts together with spending reductions. The proposal exceeds this year’s 727.9 trillion won allocation, excluding any supplementary measures.

Three major initiatives focused on chips, AI data centres and physical AI will receive priority funding. Officials aim to create capacity by restructuring current programmes instead of depending only on new revenue, a more measured approach than the headline figures imply.

Park noted that the review will target roughly 50 trillion won in savings, double the amount achieved last year. The process will examine both discretionary and mandatory outlays and eliminate weaker programmes. Such cuts are expected to face pushback from affected groups.

President Lee Jae Myung stated that authorities will employ every tool to maintain corporate investment timelines. He described the additional revenue as a valuable asset available precisely when global leadership in AI is being decided.

The gains are substantial and concentrated. Combined operating profits at Samsung Electronics and SK Hynix are forecast to surpass 600 trillion won this year, compared with about 90 trillion won previously. Semiconductors now represent a growing share of total exports.

Seoul has already pledged 880 billion dollars toward chips, data centres and robots over the coming decade under the same priority framework. The 2027 budget marks the first yearly allocation that must be matched against actual collections rather than commitments.

The figure also exceeds the government’s earlier projection. Cabinet guidelines from March set 2027 spending at 764.4 trillion won, with officials noting it could reach around 800 trillion won only if revenues strengthened and an expansionary policy continued. Both conditions have now been satisfied by the chip cycle.

The Future Response Fund has taken clearer form on paper. It will function as a strategic investment vehicle, reserving revenue above long-term averages and allocating it across youth, growth engines, regions and talent.

Officials did not specify the fund’s eventual size, launch date or the precise method for calculating long-term revenue trends. These choices will determine whether the mechanism operates as a true endowment or simply an accounting entry.

A budget built on cyclical profits assumes the upswing persists. Memory markets have declined sharply in the past, and current earnings stem from two firms supplying one wave of AI infrastructure demand.

The rally is already influencing domestic conditions, with bond yields rising and large chip-related bonuses viewed by economists as a potential inflation factor. Adding an expansionary budget on top of these pressures represents a deliberate policy choice.

The full 2027 budget bill will be released later this year. At that point the 50 trillion won restructuring target will move from a headline number to specific programme reductions, providing the first real test of the plan.