AI Semiconductor Budget Faces Significant Cuts, Industry Worries Mount

Industry concerns are escalating as a review for scaling back the budget for nurturing AI semiconductors is underway. This project aims to foster the on-device AI semiconductor industry by connecting manufacturing demand companies, such as Hyundai Motor and LG Electronics, with semiconductor design firms (fabless).

The project, which received preliminary feasibility study exemption last year and was planned with a total budget of 997.3 billion won (689.1 billion won in state funds), has recently seen proposals suggesting a reduction of the total budget to around 600 to 700 billion won during the Ministry of Economy and Finance's (MOEF) review process for project appropriateness.

On-device AI semiconductors are a next-generation technology that performs AI computations within a device, without relying on servers or the cloud. This project targets four key industries: automotive, Internet of Things (IoT)/home appliances, machinery/robotics, and defense. The goal is to establish a collaborative model where domestic fabless (semiconductor design) companies design chips based on specifications provided by demand companies, and foundry firms manufacture them. The government initiated this project due to the high reliance of domestic manufacturing on foreign AI semiconductors.

According to international market research firm Marketsys, the on-device AI semiconductor market is projected to grow rapidly from $17.3 billion in 2024 to $103.3 billion by 2030. TrendForce reports indicate that the top 10 fabless companies last year were dominated by US firms like Nvidia and Qualcomm, with no South Korean companies included.

While the project was originally planned to commence around March of this year, the announcement of the Request for Proposal (RFP) is now expected in late May due to delays in budget review. MOTIE and the Ministry of Science and ICT have completed their final review meetings, and the final budget scale is anticipated to be confirmed as early as May. A budget reduction raises concerns about weakening the competitiveness of domestic industries.