In a decisive move to secure its technological independence and redefine its role in the global AI hierarchy, South Korea has officially ratified the 'Semiconductor Special Act' and launched a massive 160 billion won venture fund dedicated to cultivating the next generation of domestic AI hardware champions. These developments, finalized in the opening days of February 2026, signal a strategic pivot from the nation’s traditional dominance in memory chips toward a comprehensive 'Sovereign AI' ecosystem that integrates logic design, high-performance computing, and national data security.

The dual-pronged approach aims to insulate South Korea from the volatile geopolitics of the global chip supply chain while challenging the near-monopoly of Western tech giants. By combining legislative streamlining with targeted financial "steroids" for startups, Seoul is betting that its local innovators can scale rapidly enough to achieve the moniker of 'K-NVIDIA,' providing the specialized processing power required for a world increasingly defined by generative AI and autonomous systems.

Legislative Foundations: The Semiconductor Special Act

The Special Act on Strengthening Competitiveness and Supporting the Semiconductor Industry, which successfully cleared the National Assembly on January 29, 2026, serves as the legal bedrock for this new era. This legislation provides a comprehensive framework for the development of the Yongin Mega Cluster, a massive industrial hub where Samsung Electronics (KRX: 005930) and SK Hynix (KRX: 000660) are currently constructing state-of-the-art fabrication plants. Unlike previous ad-hoc support measures, the new Act establishes a "Special Account for Semiconductor Industry Competitiveness Enhancement," guaranteed to remain in effect through 2036, providing a decade of fiscal predictability for long-term R&D.

Technically, the Act simplifies the regulatory hurdles that have historically slowed down semiconductor expansion. It mandates that central and local governments provide full fiscal support for essential infrastructure—specifically electricity, water supply, and road networks—which are often the primary bottlenecks in chip manufacturing. Furthermore, it allows for the exemption of preliminary feasibility studies for critical cluster infrastructure, potentially shaving years off the construction timeline for new "AI factories." While a controversial provision to exempt R&D personnel from the national 52-hour workweek was excluded from the final version due to labor rights concerns, the Act remains the most aggressive legislative support package in the nation's history.

Fostering the Next 'K-NVIDIA': The 160 Billion Won Fund

Complementing the legislative muscle is the launch of the KB Deep Tech Scale-up Fund on February 1, 2026. This 160 billion won ($120 million) initiative is specifically designed to identify and accelerate high-potential startups in the AI and system semiconductor space. Co-funded by the government-backed Korea Fund of Funds and private capital from KB Financial Group subsidiaries, the fund targets nine strategic sectors, including robotics and quantum technology, with a primary focus on domestic AI chip designers capable of competing with NVIDIA (NASDAQ: NVDA).

The market impact of this fund is already being felt by domestic "unicorns" like Rebellions, which recently completed its merger with Sapeon to form a unified AI hardware powerhouse. Valued at approximately 1.9 trillion won as of early 2026, Rebellions is currently co-developing its "REBEL" chip with Samsung Foundry, aimed squarely at the global large language model (LLM) inference market. Similarly, FuriosaAI has moved its second-generation "Renegade" (RNGD) accelerator into mass production this month. These companies stand to benefit from the new fund’s "scale-up" philosophy, which prioritizes individual investments exceeding 10 billion won to help local firms navigate the "Death Valley" of global expansion and hardware iteration.

The Sovereign AI Strategy and Global Positioning

The push for a "Sovereign AI" ecosystem is about more than just hardware; it is a calculated effort to ensure that South Korea’s digital future is not entirely dependent on foreign cloud platforms or proprietary models. To support this, the government and major domestic cloud providers like NAVER (KRX: 035420) and Kakao (KRX: 035720) have secured a landmark deal to deploy over 260,000 NVIDIA Blackwell GPUs across national data centers. This infrastructure acts as a bridge, providing the immediate compute power needed to train domestic models while local "K-NVIDIA" chips are being perfected for the next generation of inference.

This strategy places South Korea at the forefront of a growing global trend toward "AI Nationalism." As countries like France and Japan also seek to build independent AI capabilities, South Korea’s advantage lies in its vertical integration. By owning the world’s leading HBM (High Bandwidth Memory) production—with SK Hynix currently commanding over 50% of the HBM4 market and Samsung recently beginning mass production of its own sixth-generation HBM4—the nation controls the most critical component of modern AI accelerators. This allows domestic startups to collaborate more closely with memory giants, potentially creating a "closed-loop" innovation cycle that Western competitors may find difficult to replicate.

Future Horizons: IPOs and the Yongin Mega Cluster

Looking ahead, the next 12 to 24 months will be a litmus test for the success of these initiatives. Both Rebellions and FuriosaAI are expected to pursue initial public offerings (IPOs) later in 2026, which would provide a significant liquidity event for the Korean tech ecosystem and prove the viability of the "K-NVIDIA" model to global investors. On the manufacturing side, the Yongin Mega Cluster is expected to see its first operational lines by 2027, eventually becoming the largest semiconductor production base in the world.

However, challenges remain. The global talent war for AI researchers continues to intensify, and the exclusion of the workweek exemption from the Semiconductor Special Act has led some industry experts to worry about a potential "brain drain" to the United States or China. Furthermore, while the 160 billion won fund is a significant step for the local market, it remains modest compared to the multi-billion dollar venture rounds seen in Silicon Valley. The true measure of success will be whether these startups can leverage their home-field advantage in memory and the new legislative support to capture meaningful market share in the global AI inference market, currently dominated by the H100 and upcoming Blackwell architectures.

A New Chapter in AI History

The passage of the Semiconductor Special Act and the launch of the K-NVIDIA fund mark a pivotal moment in South Korea's economic history. It represents a transition from being a high-efficiency manufacturer for others to becoming a primary architect of the AI age. By embedding "Silicon Sovereignty" into national law, Seoul is declaring that it will not be a mere spectator in the AI revolution but a central hub for the hardware that powers it.

In the coming weeks, industry watchers should look for the first batch of startups to receive capital from the new fund, as well as updates on the validation of Samsung's HBM4 by major US buyers. As the Yongin Mega Cluster begins to take physical shape and domestic AI chips move from prototypes to data centers, South Korea is positioning itself as a "third pole" in the global technology landscape—a vital counterweight and partner to the existing giants of the AI world.

This content is intended for informational purposes only and represents analysis of current AI developments.

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