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South Korea is betting big on its chip industry, again. The country announced the creation of the Future Response Fund on July 5, a new vehicle designed to funnel surplus tax revenues from its booming semiconductor sector back into strategic investments in chips, physical AI, and AI data centers.
The fund is part of a broader investment push that combines public and private capital totaling at least $880B, anchored by commitments from Samsung Electronics and SK Hynix.
How the fund works
South Korea’s top memory chip manufacturers are projected to generate corporate tax revenues exceeding $65B annually. Rather than let those windfalls sit in general government coffers, Seoul wants to convert them into long-term strategic bets on the technologies it believes will define the next decade.
The fund will target three areas: semiconductor technology advancement, physical AI development, and AI data center buildouts.
Legislation to formally establish the fund is expected to be presented to parliament in August, with a potential operational launch by December. The total size of the fund will ultimately depend on realized tax revenues and parliamentary approval.
Samsung and SK Hynix are also planning to build two new chip fabrication plants each in South Korea’s southwest region.
A pattern of aggressive industrial policy
The K-CHIPS Act already provides tax credits for semiconductor facilities and research expenditures. In early 2024, the government unveiled ambitious plans for a major industrial cluster in Gyeonggi Province. President Lee Jae Myung’s recent investment blueprint, which the Future Response Fund now operationalizes, represents the latest step in this trajectory.
South Korea currently holds roughly 18% of the global semiconductor market.
The fund aims to foster balanced national growth, particularly in areas outside the capital, while also channeling support toward youth housing and employment.
What this means for the global chip landscape
For Samsung and SK Hynix specifically, the new fab plants in the southwest could diversify production risk. High-bandwidth memory, the type of chip that SK Hynix has been selling to companies like Nvidia for AI training, has been in particularly short supply.
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