South Korea plans to establish a new fund that would channel tax revenues generated by the country’s semiconductor boom into programmes for younger generations and investments in artificial intelligence and other future growth industries, as the government seeks to turn a cyclical technology windfall into longer-term economic gains.
The proposed “Future Response Fund” would finance measures to help young South Koreans find jobs, secure housing, build assets, marry and raise children, while directing additional resources toward AI, regional development and talent development, the budget ministry said on Friday.
The fund would primarily be financed by tax revenue collected above a benchmark based on the average growth of domestic tax receipts over the previous decade. In years when tax collections exceed that threshold, the additional revenue would be accumulated rather than fully spent, allowing the government to deploy the resources when tax receipts weaken.
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The government has not provided an official estimate of the fund’s eventual size. South Korean media have reported that 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.
The proposal comes as South Korea’s semiconductor industry benefits from the global AI investment boom. Samsung Electronics and SK Hynix, the country’s two largest memory-chip makers, have reported sharply stronger earnings as demand for high-bandwidth memory and other advanced chips used in AI systems accelerates.
The government is seeking to use part of the resulting fiscal benefit to address structural challenges that extend well beyond the semiconductor industry.
South Korea faces one of the world’s most severe demographic pressures, with persistently low birth rates threatening to shrink the working-age population and increase the burden on future generations. Young people also face high housing costs and difficult labor-market conditions, creating obstacles to household formation.
The proposed youth programmes would cover employment, housing, asset building, marriage and childbirth. The government’s approach effectively links the country’s technology-driven tax gains with policies designed to improve economic opportunities for younger households.
Government data showed South Korea’s youth unemployment rate rose to 6.8% in July. President Lee Jae Myung has also warned that the rapid spread of AI could further complicate employment prospects for younger workers as automation and AI-enabled systems reshape the labor market.
That creates a policy dilemma for Seoul. The AI boom is generating demand for advanced semiconductors and boosting corporate earnings and tax receipts, but the same technology could disrupt employment in industries that traditionally provided jobs for younger workers.
The Future Response Fund is intended in part to address that tension by investing in the skills required for an AI-driven economy. Under the plan, spending would extend beyond AI infrastructure to talent development, higher education and lifelong learning.
The government also plans to overhaul education funding, redirecting more resources toward developing talent and strengthening higher education and lifelong learning programmes. The aim is to ensure that workers can acquire new skills as technology changes the composition of jobs.
The investment component of the fund would also support regional development and strategic technologies beyond AI. That could help Seoul spread the benefits of the semiconductor and technology boom beyond the country’s major industrial centers, while strengthening the economic base needed to support future growth.
The proposed mechanism marks a shift toward treating unusually strong tax receipts as a source of long-term investment rather than simply additional annual budget revenue. By establishing a benchmark tied to the decade-long growth trend in domestic tax receipts, the government would be able to save part of the upside during strong revenue years and draw on those resources during periods of weaker collections.
That approach could also provide a buffer against the volatility inherent in South Korea’s export-driven economy. Semiconductors are among the country’s most important exports, but the industry is highly cyclical and vulnerable to changes in global demand, inventory levels, prices and investment spending.
Using semiconductor-related tax gains to finance longer-term programmes therefore carries both an opportunity and a fiscal challenge. The government must ensure that temporary windfalls do not become the basis for permanent spending commitments that could prove difficult to maintain when the chip cycle turns.
The plan also places South Korea’s AI ambitions within a broader economic strategy. Rather than relying solely on semiconductor manufacturing to benefit from the AI boom, Seoul wants to develop domestic capabilities in AI, education, talent and other strategic technologies while preparing workers for changes in the labor market.
The government plans to submit legislation establishing the fund alongside its 2027 budget proposal to parliament next month.