South Korea unveils $3.5 billion chip fund to bolster semiconductor supply chain

South Korea is set to launch a 5 trillion won (approximately $3.52 billion) semiconductor fund aimed at supporting promising materials, parts, equipment, and fabless companies, according to a senior presidential official. The announcement came after a meeting chaired by President Lee Jae Myung on Monday.

Presidential Chief of Staff Kang Hoon-sik told reporters that the government will also provide an additional 5 trillion won in trade finance for suppliers. These measures build on the president's semiconductor megaproject initiative from June, under which Samsung Electronics, SK Hynix, and their partners are expected to invest over $576 billion in new chip manufacturing facilities, including major fabs in the country's southwest.

Kang outlined a separate 10-year, 1 trillion won programme to foster cooperation between large companies and smaller suppliers across semiconductor development, testing, and production. The government also plans to push for a special act in parliament this year to expedite permits, environmental reviews, and infrastructure construction for designated chip hubs.

During the meeting, attended by senior executives from Samsung and SK, President Lee urged the Defence Ministry to relocate functions of a military air base in Gwangju by mid-2028. The site, covering 8.3 million square metres, has been designated a candidate national industrial complex, with relocation and temporary dispersal of military facilities targeted for completion by the second half of 2028.

Kang assured that power and water supplies would be ready on schedule for new projects. For the Gwangju-South Jeolla cluster, authorities aim to secure 650,000 metric tons of water daily by 2030 using recycled wastewater and dam supplies. For the flagship Yongin cluster south of Seoul, the government plans to supply 14.7 gigawatts of electricity by 2041 via cogeneration, LNG generation, and inter-regional power transfers.

Kang added that megaprojects worth over 350 trillion won in other regions are scheduled to begin construction or expansions this year, along with 57 trillion won in research and development projects. The administration has made expanding semiconductor capacity a central pillar of its industrial strategy, citing insufficient existing bases around Yongin and Pyeongtaek to meet AI-driven demand.