South Korea to channel chip boom windfall into growth fund, not welfare

South Korea's presidential office has clarified that a new fund, built on record tax revenues from the semiconductor boom, will be directed toward long-term growth projects rather than recurring welfare spending. The Future Response Fund is designed to support initiatives over a three- to four-year horizon, according to a senior official who briefed reporters on Wednesday.

The fund aims to channel windfall tax receipts from AI-driven chip demand into investments that can lift the country's potential growth rate, which has been under pressure from demographic decline and a shrinking workforce. The official described the current moment as a "once-in-a-thousand-years opportunity" to reverse the slide in growth prospects, warning that failing to act could mean missing the only chance to address structural challenges.

Some investments under the fund are expected to extend beyond President Lee Jae-myung's current term, which ends in 2030. The official rejected criticism that the fund could operate as an off-budget "slush fund," stressing that all spending would remain subject to standard budget procedures and parliamentary oversight.

Under the proposed structure, the government would have flexibility to adjust 20% to 30% of allocations within legal limits, allowing quicker responses to changing needs—such as fluctuations in GPU costs—without resorting to supplementary budgets. The budget ministry has outlined four components for the fund: youth investment, growth engines including planned semiconductor clusters and future technology, regional development, and education and talent development.

The fund's total size has not been officially disclosed, though local media estimates suggest it could exceed 100 trillion won ($72 billion). The official said the government expects solid tax revenue from memory-chip giants Samsung Electronics and SK Hynix over the next two years, but cautioned that there is "no guarantee" beyond that period. The fund is also intended to smooth fiscal management, reducing the need for sharp spending cuts or bond issuance when tax revenues fluctuate.