South Korea's Tech Renaissance: Why Semiconductors and AI Are Set to Dominate

South Korea’s tech sector is on the cusp of a historic transformation, driven by President Lee Jae-myung’s aggressive policy agenda. With a $71.5 billion AI investment pledge, tax incentives for semiconductor manufacturers, and a push for sovereign AI control, Lee’s vision has positioned Samsung, SK Hynix, and emerging AI startups as the linchpins of a new era of growth. While U.S. tariffs and global competition pose risks, domestic policy tailwinds and structural shifts toward renewables and tech infrastructure could make this one of the most compelling investment themes of 2025.

The $71.5B AI Playbook: Building Sovereign Tech Power

Lee’s 100 trillion won ($71.5B) AI investment plan is a masterstroke of strategic foresight. The funds will be funneled into AI data clusters, GPU/NPU infrastructure, and talent development, with a focus on creating a “Korean-style ChatGPT” to assert control over critical AI tools. This isn’t just about competing with U.S. and Chinese tech giants—it’s about ensuring South Korea’s economic sovereignty in an era where data and algorithms are the new oil.

The policy’s crown jewel is the AI control tower framework, which centralizes decision-making under presidential oversight. This structure accelerates innovation while addressing ethical concerns, as seen in the AI Framework Act, which mandates transparency for generative AI and risk management for high-impact systems.

Semiconductor Tax Incentives: Fueling Global Dominance

Lee’s tax reforms are equally transformative. The 10% manufacturing tax credit for semiconductors—rising to 20% for large firms and 30% for SMEs—directly lowers costs for Samsung and SK Hynix, enabling them to outpace competitors like TSMC and Intel. The exclusion of controversial 52-hour workweek exemptions avoids labor disputes while still addressing workforce shortages through graduate schools and talent retention programs.

The $622 billion Gyeonggi semiconductor megacluster, set to expand wafer capacity and AI infrastructure by 2047, is the physical manifestation of this vision. Even with risks like overcapacity and geopolitical friction, the sheer scale of investment ensures South Korea will remain the world’s semiconductor superpower.

Why U.S. Tariffs Won’t Stop the Train

Critics point to U.S. tariffs and Japan’s export controls as headwinds, but Lee’s policies are designed to counter these risks. By fostering domestic AI talent and reducing reliance on foreign tech, South Korea is building a self-sustaining ecosystem. The AI Framework Act’s extraterritorial reach also pressures foreign firms to comply with local standards, creating a level playing field.

Meanwhile, the shift to renewables and electric vehicles (EVs) is a tailwind. Semiconductors are the brains behind EVs, and AI is critical for smart grids—both sectors are booming.

Investment Strategy: Overweight Semiconductors and AI Infrastructure

The June election is a catalyst. If Lee’s party retains power, these policies will accelerate. Here’s how to play it:

1. Buy the Semiconductor Leaders:
2. Samsung Electronics (SSNGF): The world’s largest memory chipmaker, benefiting from tax breaks and AI-driven demand.

3. SK Hynix (SKMRF): A key player in DRAM and NAND, now expanding into advanced logic chips.

4. AI Infrastructure Plays:

5. Kakao Brain (KRMB): A leading AI startup developing chatbots and enterprise solutions.

6. LG Uplus (LGU): Leveraging 5G and AI for smart city projects.

7. Long-Term Bets:

8. The Gyeonggi megacluster: Invest via ETFs tied to construction and tech infrastructure.

Risks? Yes. But the Upside Outweighs Them

Overcapacity in semiconductors? Offset by tax-supported demand. Geopolitical tensions? Mitigated by AI sovereignty. Near-term headwinds? Balanced by long-term structural shifts. This is a decade-long megatrend, and 2025 is the inflection point.

Final Call: Act Before the June Election

Lee’s policies are no longer just promises—they’re being codified into law. With the June election reinforcing his mandate, now is the time to overweight semiconductors and AI stocks. The risks are real, but the tailwinds—tax incentives, sovereign tech control, and global demand—are unstoppable.

The next decade belongs to the companies that control the chips and the code. South Korea’s tech sector is leading the charge.