The South Korean government will invest 1.5 trillion won annually starting next year to develop a semiconductor cluster in the Gwangju and Jeonnam integrated region. Anchor companies making large-scale investments in non-capital region growth engines will receive up to 50% support for their facility investments. The plan focuses on the transition of manufacturing to artificial intelligence (AI) and region-led growth.
The Ministry of Trade, Industry and Energy announced on September 1 that it has prepared a budget of 13.2573 trillion won for next year, an increase of 3.8231 trillion won (40.5%) from this year. This is the largest budget in the ministry's history and the highest growth rate recorded. Including the ministry's projects under the Future Response Fund (9.118 trillion won), the actual budget for the ministry will be 14.1691 trillion won, a 50.2% increase from this year.
The ministry identified key investment areas for next year's budget as: M.AX and mega projects, advanced industries, region-led growth in the five major and three special areas, industrial and resource security, and responses to changes in the trade environment.
Funding for M.AX and mega projects will more than double from 1.6309 trillion won this year to 3.7261 trillion won next year. Seven projects transferred to the Future Response Fund will also focus on M.AX-related initiatives.
To develop AI solutions that convert the experience and know-how of skilled workers into AI data, 290 billion won will be allocated. Additionally, 120 billion won will support full-stack AI factories operated entirely by AI, and 115.8 billion won will be used to establish a data library for collecting and managing manufacturing data.
Significant funding will also be directed toward the development of the southwest semiconductor cluster. As part of the Gwangju and Jeonnam administrative integration incentives, the government will provide a total of 6 trillion won over four years, starting next year, with 1.5 trillion won allocated each year. The funding will be sourced from a newly established special account for semiconductors.
The specific projects will be autonomously designed by the integrated local government to align with the goal of creating a semiconductor cluster. Support may include semiconductor industry research and analysis, infrastructure development, support for resident companies, and necessary projects for building fabs.
A ministry official stated, "The government will be responsible for budget preparation and execution, while the integrated local government will autonomously decide how to structure the projects. It is essential that the projects are organized and executed in accordance with the original purpose and use of the semiconductor cluster."
The ministry's budget will focus on industrial infrastructure and cluster development. The Ministry of Land, Infrastructure and Transport and other relevant departments will support living conditions such as workforce mobility, housing, and transportation, while the Ministry of Environment will oversee the construction of power networks.
The budget for region-led growth in the five major and three special areas will increase by 62% from 1.2797 trillion won this year to 2.0731 trillion won next year. This funding will support corporate investments and research and development (R&D) centered on 25 growth engine industries selected from seven non-capital regions.
If anchor companies in growth engine industries make large-scale investments in local areas, they can receive up to 50% support for their facility investments. Eligible companies include large enterprises investing over 300 billion won and mid-sized companies investing over 100 billion won. The support rate will be determined based on investment scale, accompanying investments from upstream and downstream companies, job creation, and contributions to the local economy.
Next year, a new allocation of 700 billion won will be set aside for special subsidies for growth engine industries in the five major and three special areas. Additionally, 140 billion won will be invested in large-scale R&D projects involving anchor companies, partner firms, and universities. The budget for the AX transition support for industrial complexes, including the establishment of AX demonstration industrial complexes and demo dark factories, will increase more than fourfold from 28 billion won to 1.162 trillion won.
To foster advanced industries and secure cutting-edge technologies, the budget for supporting key technology development by industry will be set at 12.421 trillion won, a 4.3% increase from this year. The budget to enhance response capabilities to global supply chain crises for oil and critical minerals will be expanded by 84.5% to 36.825 trillion won.
In response to ongoing geopolitical instability in the Middle East, the budget for expanding stockpiles and storage facilities for oil will be significantly increased. New funding will be allocated to enhance refining facilities and support technology development to diversify crude oil import routes. Additionally, due to the continued implementation of the oil price cap system, a budget of 1.4497 trillion won will be allocated in the fourth quarter to compensate oil refiners for losses.
* This article has been translated by AI.
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