The government has proposed a fiscal overhaul to secure extra revenue and invest in future growth drivers, while in the global AI chip market, rising demand and high-interest financing are adding pressure to push prices up.
The move aims to strengthen the economy's fundamentals and secure future growth drivers in response to the declining trend in potential growth.
Potential growth refers to the maximum growth rate an economy can sustain without generating inflationary pressure.
To respond proactively to these long-term concerns about slowing growth, strategic investment through the fund is being considered as an important means of reviving the economy's growth rate.
The expected size of the Future Response Fund will vary greatly depending on the amount of additional tax revenue. Currently, additional revenue is estimated at roughly 60 to 70 trillion won.
If strong performance in the semiconductor sector keeps tax revenue rising, some forecasts say the fund could reach as much as 100 trillion won.
Specifically, it will support young people's jobs, housing, and marriage, and put money into three mega-projects, including artificial intelligence (AI).
The government also plans to use the fund for regional infrastructure and science and technology talent development, contributing to balanced regional growth and building a foundation for future growth.
The fund's overall operating plan must go through National Assembly deliberation, but controversy has arisen over the fact that, once approved, the government could change how the fund is used within a certain range without further approval from the Assembly. Concerns have been raised that the fund could be used like the government's 'pocket money.'
Some also point out that this approach could be used to bypass the supplementary budget process. Political parties are expected to clash over how far Assembly oversight should extend to ensure transparent and efficient operation of the fund.
For example, the government has already set up a 150 trillion won National Growth Fund to support AI and other advanced industries.
If investments overlap, there are concerns that the efficient allocation of limited national resources could be undermined. The fund's distinct role and ways to create synergies with existing policies will therefore be important.
The aim is to rationalize how education budgets are allocated to reflect changing realities, such as declining student numbers.
Under a new formula for education grants, funds would be reviewed and distributed according to need at each point in time. The surplus funds this produces are expected to be one of the main sources for the Future Response Fund.
This is meant to ease the shock to education finances from rapidly falling student numbers and allow schools to cover fixed operating costs.
Under this approach, if education grants fall compared with the previous year, the state will cover the difference, reflecting a commitment to prevent sudden financial instability on the ground.
If the current system were maintained, next year's education grants would be around 100 trillion won. However, if the reform proceeds as the government announced, next year's grants are expected to fall to about 78.9 trillion won.
The roughly 20 trillion won in surplus funds generated by this reform will be used as the Future Response Fund's resources. This shows the government's intent to actively restructure its fiscal framework to secure future growth drivers.
Major server makers such as Dell have reportedly already informed customers of the change.
The price increase is expected to cover high-performance AI server lineups, including Nvidia's next-generation products Vera Rubin and Grace Blackwell.
Nvidia's AI chips require HBM, a high-performance memory, to deliver optimal performance.
Server DRAM prices jumped 53–58% from the previous quarter in the second quarter, and price increases continue as HBM supply shortages deepen. As a result, even Nvidia, which enjoys high profitability, has no choice but to pass the memory cost burden on to its product prices.
Despite Nvidia's AI server price increase, customer demand for high-performance AI chips remains solid. This is because AI investment is booming around the world.
Meanwhile, only a limited number of companies can reliably supply HBM, including Samsung Electronics, SK Hynix, and Micron. This has strengthened the bargaining power of HBM makers, earning them the nickname 'super suppliers.'
This situation is also giving memory makers an opportunity to win new customers and expand market share as competition in AI chip development intensifies.
Rising memory prices are expected to benefit profitability at HBM makers such as Samsung Electronics and SK Hynix. At the same time, there are concerns that sharp increases in AI chip prices could add strain across AI investment overall.
One analysis suggests that if AI chip prices rise 17%, building a large data center could incur about 5 billion dollars (roughly 7 trillion won) in additional costs. This increases the cost burden of AI data center construction and could slow the overall pace of AI investment.
QTS, a company building data centers to be leased by Microsoft in Georgia, USA, recently issued 3.9 billion dollars (about 5 trillion won) in five-year bonds. The bonds carried an interest rate of 10.28% per year.
Four months earlier, the same company's bond rate was in the 7% range. That is an increase of nearly 3 percentage points, showing the high interest burden of raising funds to build data centers.
Demand for QTS's bond issue was still strong, with orders for about 23 billion dollars, close to six times the originally targeted 3.9 billion dollars. As a result, the bonds were issued at a slightly lower rate than initially proposed, but the final rate was still a high 10%-plus per year.
Meta also issued bonds at a high 10.3% annual rate to raise funds for building a data center in Texas. Such rising AI infrastructure costs and the need to raise funds at high interest rates add upward pressure on overall market rates, weighing on the AI investment environment.
Share buybacks and cancellation refer to a company using its own funds to purchase its own shares and permanently retire them. This reduces the total number of issued shares.
As a result, as the total number of shares falls, the value of each shareholder's holdings and their share of dividends can theoretically increase. This is a way to enhance shareholder value by increasing each shareholder's share, even if the company's overall value does not change.
Suppose a five-member group decides it does not need all five members and removes one, continuing as a four-member act. Even if the group's total earnings stay the same, the number of members sharing those earnings goes down, so each remaining member's share increases.
Similarly, when a company buys back and cancels its shares, the total number of shareholders falls. Even if the company's total value or total profit stays the same, the portion each remaining shareholder receives from profits or assets grows. In the end, the value of each share rises, increasing the wealth of existing shareholders.
Answers come from the transcript, with the exact spot cited.
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