South Korea has announced a new initiative that will capture surplus tax revenues from AI and semiconductor firms and place it in a fund for targeted growth projects.
The Future Response Fund is intended to fund projects such as youth employment, housing, and childbirth programmes, as well as strategic investment in growth industries such as advanced technologies.
It will be funded in large part by tax windfalls from firms like Samsung Electronics and SK Hynix, which are seeing all-time high profits driven by intense demand for AI memory chips.
The South Korean government expects to finance the fund using tax receipts, capturing a percentage of profits above a benchmark tied to growth in domestic tax receipts.
In July, Samsung Electronics reported an 1,800 per cent year-on-year increase in second-quarter profit, reaping 89.5 trillion won ($62 billion) from increased memory sales. The same month, SK Hynix similarly reported a 250 per cent year-on-year increase in profits.
While no official estimate for the size of the fund was given, South Korean media outlets reported it could range from 60 to 100 trillion won ($43 to $72 billion).
South Korea has provided repeated tax credits to its domestic chip manufacturers in recent years and continues to lean heavily on the economic benefits of this industry as AI demand increases. Samsung Electronics and SK Hynix together make up over half of the total market capitalisation for the Korea Composite Stock Price Index (KOSPI).
In June, the South Korean government announced a $576 billion industrial strategy to rapidly build out domestic AI chip production. Samsung and SK Hynix are expected to invest a combined 800 trillion won ($518.30 billion) towards the plans, which will see new chip fabrication sites built in the southwest of the country.
Kim Jung-kwan, minister of trade, industry, and resources, told media at the time that South Korea intends to double its production of dynamic random-access memory (DRAM) over the next five years.
