The South Korean government will launch a 5 trillion won (approx. $3.52 billion) semiconductor fund for companies involved in chip materials, parts, equipment and fabless chip design, Presidential Chief of Staff Kang Hoon-sik said Monday.
The government will also provide another 5 trillion won (approx. $3.52 billion) in trade finance for semiconductor suppliers, expanding financial support beyond the country’s major chipmakers.
“The government will create a new semiconductor fund worth about 5 trillion won focused on promising materials, parts and equipment firms and fabless companies,” Kang said.
The measures are part of President Lee Jae Myung’s broader semiconductor megaproject, which includes more than $576 billion in planned investment from SK hynix, Samsung Electronics, suppliers, and local governments, according to Reuters.
A separate 1 trillion won program will run for 10 years to encourage cooperation between large semiconductor companies and smaller suppliers in development, testing and production.
Infrastructure is the bigger test
Money alone will not build South Korea‘s next generation of chip hubs. The government is also racing to put the necessary land, electricity and water infrastructure in place.
Officials want military functions at an air base in Gwangju relocated by mid-2028 to clear the way for a planned semiconductor complex. The government has designated an 8.3 million-square-meter area as a candidate national industrial complex, with relocation and temporary dispersal of military facilities targeted for completion in the second half of 2028.
For the planned Gwangju-South Jeolla semiconductor cluster, authorities aim to secure 650,000 metric tons of water per day by 2030 using recycled wastewater and nearby dams.
The Yongin semiconductor cluster, meanwhile, is expected to receive 14.7 gigawatts of electricity by 2041 through a mix of cogeneration, liquefied natural gas generation and power supplied from other regions, Reuters reported. The government is also seeking passage of a Mega Special Zone Act this year to speed up permits, environmental reviews and infrastructure construction.
South Korea’s strategy shifts toward a complete chip ecosystem
The new fund shows Seoul is looking beyond building more factories and trying to strengthen the entire semiconductor chain.
Large chipmakers often receive most of the attention, but advanced manufacturing depends on hundreds of specialized suppliers producing chemicals, equipment, components and design technologies. Supporting these smaller companies could help South Korea reduce supply risks and create a deeper domestic semiconductor ecosystem.
However, the strategy carries execution risks. Large-scale chip projects can take years to complete, and delays in infrastructure construction, regulatory approvals or supplier development could slow the expected benefits. The semiconductor industry is also highly cyclical, meaning heavy investment could become a burden if global demand weakens.
For semiconductor businesses, the fund could create financing and procurement opportunities for equipment makers, materials suppliers, and fabless chip designers. Its effect on global chip capacity will depend on whether South Korea can deliver the required power, water, and industrial sites on schedule.
Read more: SK Hynix’s AI memory chip rally highlights the growing demand behind South Korea’s semiconductor investments.