South Korea Prepares Record $531 Billion Budget for 2027 with a Focus on AI and Semiconductors

South Korea proposed a record fiscal 2027 budget of over 800 trillion won ($530.97 billion) on July 13, 2026, up from 727.9 trillion won in 2026, backed by a revised tax revenue estimate of 500 trillion won driven by record profits at SK Hynix and Samsung Electronics. President Lee Jae Myung called the AI semiconductor tax windfall a "golden window" of opportunity and announced a Future Response Fund to invest excess revenues in youth, growth engines, regional development, and talent. The government also prioritized three mega-projects — semiconductors, AI data centers, and physical AI — and pledged to restructure 50 trillion won in spending, twice the prior year's level.

SK Hynix Nasdaq listing

• ▪SK Hynix shares rose 12.8% in their first day of trading on the Nasdaq.
• ▪SK Hynix debuted on the Nasdaq after raising $26.5 billion in the largest U.S. listing ever by a foreign company and the second-largest share sale in U.S. history.

HBM chip supply shortage

• ▪SK Hynix CEO Kwak Noh-jung forecasted that 2027 will be the worst year in the semiconductor industry's history from a supply perspective due to a memory chip shortage.
• ▪SK Hynix co-developed the world's first high-bandwidth memory chip with AMD in 2013 and currently controls roughly 60% of the global high-bandwidth memory market by revenue.

Korea Discount corporate governance

• ▪South Korean companies suffer from a 'Korea Discount' where shares trade at a discount compared to global peers, which analysts attribute to corporate governance practices of family-controlled conglomerates.
• ▪South Korean stocks trade at cheap valuations with the Kospi trading at 6.4 times forward earnings despite an 80% rally, as corporate earnings have outpaced share price gains.

Employee profit-sharing bonuses

• ▪The Bank of Korea warned in mid-June 2026 that unprecedented semiconductor employee profit-sharing bonuses could have an inflationary effect on the economy.
• ▪SK Hynix agreed to allocate 10% of its annual operating profits to employee bonuses, with the first payout averaging around 140 million won ($93,000) per employee.

South Korean market concentration

• ▪SK Hynix and Samsung Electronics make up more than half of the total market capitalization of South Korea's KOSPI index.
• ▪South Korean regulators approved single-stock leveraged ETFs in April 2026, but strict eligibility rules ensured that only Samsung Electronics and SK Hynix qualified for such funds.

Chip tax windfall budget

• ▪South Korea plans to launch a Future Response Fund backed by excess tax revenue to invest in youth, growth engines, regions, and talent.
• ▪South Korea boosted its 2027 tax revenue estimate to 500 trillion won ($331.6 billion) from an earlier forecast of 412.1 trillion won, driven by the artificial intelligence semiconductor boom.
• ▪South Korea plans to propose a record fiscal 2027 budget of over 800 trillion won ($530.97 billion), representing an increase from the 727.9 trillion won spending plan for 2026.