South Korean Government Steps Up Support for AI and Semiconductors and Introduces Price Stabilization Measures

Overview

The report focuses on the South Korean government's announced "3 Mega Projects" and accompanying price stabilization policies. Its core content is the promotion of large-scale public-private capital expenditure, infrastructure provision, and regulatory support through three main pillars—semiconductors, Physical AI, and AI data centers—while curbing short-term inflation through fiscal spending, fuel price ceiling adjustments, food discounts, and public service price freezes.

Core views

Goldman Sachs' core view is that South Korea is elevating the upgrading of the AI industry chain into a long-term national investment theme. Semiconductors remain the primary capital expenditure focus, while AI data centers and Physical AI provide new sources of demand and infrastructure expansion opportunities. The combination of long-term plans by Samsung, SK Group, SK Hynix, SK Telecom, GS Group, and Naver with government support could create a sustained investment cycle equivalent to a significant proportion of GDP. In the short term, price stabilization measures may be reflected in the July CPI, but these policies are primarily in the nature of price controls and fiscal subsidies, so their persistence remains to be seen.

Analysis framework

The report uses a policy interpretation and capital expenditure aggregation approach, combining and evaluating government announcements, regional semiconductor cluster investments, AI manufacturing transformation, AI data center capacity plans, and long-term investment plans by companies such as Samsung and SK Group, while measuring the macroeconomic impact as a proportion of GDP. For inflation, the report assesses the short-term price impact based on CPI basket coverage, fuel price ceilings, food discounts, and public service price freezes.

Methodology notes

• Policy-driven investment analysisPublic-private partnership capital expenditure framework

  Evaluate government commitments, infrastructure support, and corporate investment plans together to assess the intensity of industrial investment.

  This framework is suitable for analyzing strategic national industries because policy support may reduce infrastructure, energy, land-use, and regulatory bottlenecks, thereby amplifying companies' willingness to spend capital.

• Industry chain thematic analysisAI infrastructure expansion framework

  Identify beneficiary segments across semiconductors, AI data centers, NPUs, power, and cooling systems.

  Rather than providing individual stock recommendations, the report emphasizes the contribution of AI investment to South Korean semiconductor manufacturing, advanced packaging, data center capacity, and related infrastructure ecosystems.

• Macroeconomic price analysisCPI policy transmission framework

  Assess the impact on short-term inflation readings based on the weights of CPI basket categories covered by the policies.

  The report notes that food, fuel, and public service price measures cover portions of the CPI basket, so the price stabilization effect is expected to be reflected mainly in the July CPI.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• South Korean semiconductor industry

  The first pillar of the "3 Mega Projects," receiving the largest scale of investment and infrastructure support.

  Strengths

  The government is promoting capacity expansion, regional manufacturing base construction, investment in next-generation memory and chips, and the establishment of a presidentially led special committee on semiconductor competitiveness.

  Weaknesses

  The investment cycle may extend beyond ten years, and execution depends on corporate capital expenditure, energy supply, land-use approvals, and the global chip cycle.

  Comparison

  Compared with Physical AI and AI data centers, semiconductor investment is larger in scale; the report estimates that it accounts for approximately 6% of GDP among related investments.

  Risks

  Global semiconductor demand fluctuations, competition in advanced process technology, export controls, project delays, and uncertainty over capital expenditure returns.

• South Korean AI data centers

  The third pillar of the "3 Mega Projects," through which the government is working with major conglomerates to build world-class data center infrastructure.

  Strengths

  SK Group, GS Group, and Naver plan to build 8.4GW of capacity, while SK Group is further planning to reach 18.4GW by 2035.

  Weaknesses

  Their high capital intensity and energy consumption make them dependent on stable power, water resources, cooling solutions, and preferential electricity rates.

  Comparison

  Compared with traditional data centers, AI data centers have higher requirements for power density, chip supply, and cooling capacity.

  Risks

  Power bottlenecks, rising construction costs, insufficient capacity utilization, regulatory approvals, and foreign investment falling short of expectations.

• Physical AI and robotics

  The government aims for South Korea to become one of the world's top three AI robotics powers and is promoting the integration of AI into manufacturing.

  Strengths

  Policy focuses on AI transformation in manufacturing, core AI technologies and data, and regional mass-production hubs, which should help improve industrial automation capabilities.

  Weaknesses

  Commercialization pathways and investment returns may be slower than for semiconductor hardware, while the implementation of core software, data, and use cases still requires validation.

  Comparison

  Compared with AI data centers, this area is more focused on application and manufacturing upgrades; compared with semiconductors, it depends more on industrial use cases and the maturity of the robotics ecosystem.

  Risks

  Insufficient technological maturity, low corporate adoption, labor and regulatory obstacles, and intensifying overseas competition.

• South Korean inflation and interest rate expectations

  The government is curbing short-term prices through fiscal subsidies, a reduction in the fuel price ceiling, and public service price freezes.

  Strengths

  The policies cover multiple CPI-related categories, including food, fuel, public services, and transportation, and may directly suppress the July CPI.

  Weaknesses

  Some measures take the form of subsidies or price freezes, which may postpone rather than eliminate price pressures.

  Comparison

  Compared with long-term industrial policies, price stabilization measures are more short-term macroeconomic stabilization tools.

  Risks

  Price rebounds after subsidies are withdrawn, fiscal burdens, renewed increases in energy prices, and persistent inflation.

Key data

• Investment in new semiconductor production and packaging hubsKRW881trnIncludes investments related to semiconductor manufacturing bases and regional clusters outside the Seoul metropolitan area. The report says the goal is to expand capacity and accelerate projects such as Yongin.
• Support for next-generation memory and chipsKRW30trnPlanned investment over the next 15 years to increase market share in high-growth emerging chip markets.
• AI manufacturing transformation investmentKRW20trnThe government's goal is to create KRW100trn in added value and promote the transformation of manufacturing through AI.
• AI data center investmentKRW550trnSK Group, GS Group, and Naver plan to build a combined capacity of 8.4GW, while SK Group also plans to expand to 18.4GW by 2035.
• Samsung domestic long-term investment planKRW2,450trn by 2040Approximately KRW2,100trn is allocated to semiconductors, with the remainder directed toward AI manufacturing transformation, future energy, technology logistics, and other areas.
• SK Hynix long-term semiconductor investment planKRW1,100trnIncludes approximately KRW600trn for the Yongin semiconductor cluster project.
• Average annual AI-related investment intensityApproximately KRW380trn/year, equivalent to about 10% of GDPThe report estimates the average level over the next decade, with semiconductor-related investment accounting for approximately 6% of GDP.
• Fiscal spending on price stabilizationKRW1trnUsed for agricultural subsidies, food discounts, a reduction in the fuel price ceiling, public service price freezes, and support for low-income households and small businesses.
• Fuel price ceiling adjustmentReduced by KRW150 per liter, approximately 10%One of the measures to address fuel price inflation.
• Public service price freezeExtended through the second half of the yearIncludes electricity, household LNG, and public transportation costs. The report says these items account for approximately 15% of the CPI basket.

Impact & implications

For investors, the report reinforces the long-term policy tailwinds for South Korean semiconductors and AI infrastructure. Semiconductor manufacturing, advanced packaging, AI data centers, power and cooling solutions, NPUs, and robotics-related ecosystems may benefit from expanding capital expenditure. However, given the long time horizon and enormous amounts involved, execution progress, funding sources, power and water availability, regulatory implementation, and the actual pace of corporate investment will determine whether the investment theme materializes. From a macroeconomic perspective, price stabilization policies may temporarily lower CPI, but their effects may prove difficult to sustain if energy, food, or public service price pressures rise again.

Risks

• The government's and companies' investment plans involve enormous amounts, and actual implementation may be constrained by financing, approvals, energy, water resources, and construction timelines.
• Semiconductor demand and prices are cyclical; if global demand for AI hardware slows, returns on capital expenditure may decline.
• AI data center expansion is highly dependent on power and cooling infrastructure, and insufficient supply could delay project progress.
• Price stabilization measures may only temporarily lower CPI, creating a risk of a rebound after price freezes or subsidies are withdrawn.
• The report provides no individual stock ratings or target prices and cannot directly be used to derive investment recommendations for specific securities.

What to watch

• Whether the South Korean government subsequently releases more detailed investment timelines, fiscal arrangements, and lists of regional projects.
• The approval, construction, and production progress of the Yongin semiconductor cluster and semiconductor bases outside the Seoul metropolitan area.
• The actual pace of capital expenditure execution by Samsung, SK Group, SK Hynix, SK Telecom, GS Group, and Naver.
• The implementation of power, water, and cooling infrastructure supporting the 8.4GW AI data center target and SK Group's long-term 18.4GW capacity target.
• Whether the July CPI reflects the short-term impact of fuel, food, and public service price measures.
• Whether fuel price ceilings, food discounts, tariff reductions, and public utility price freezes are extended or withdrawn.