Recasts and writes through

By Kyu-seok Shim and Joyce Lee

SEOUL, June 8 (Reuters) - South Korea will soon unveil a large-scale investment project, President Lee Jae Myung said on Monday, adding that the government was determined to make good use of buoyant tax revenues generated from the chip sector amid the AI boom.

Speaking at a press conference to mark his first year in office, Lee also pledged to make South Korea the first country to fully integrate AI across industries.

Samsung Electronics 005930.KS and SK Hynix 000660.KS have reported sky-high profit growth to record levels in the first quarter, driven by the surge in AI adoption that has fuelled global demand for memory chips.

The greater tax revenues create an opportunity to rethink the country's growth strategy, he said.

"We will soon unveil to the Korean people a large-scale investment project, which will represent a fundamental transformation of our growth strategy," Lee said, without elaborating on the nature of the project.

HUGE TAX GAINS

Samsung Securities has estimated that South Korea may gain an extra 70 trillion won ($46 billion) in tax revenue this year, much more than the government's 27 trillion won estimate in April, citing chip companies' profit outlooks and the knock-on effects throughout the economy.

The massive surge in profits for the two chipmakers as well as eye-popping bonuses for their employees have sparked much debate in South Korea over those benefiting from AI and those less fortunate.

This month, South Korea's labour minister called on the country's major tech firms to share the spoils of their massive windfall profits. Lee echoed that sentiment on Monday, saying the gains of business success should be shared throughout society.

Separately, Lee also said that he would seek to make South Korea the preferred partner for other countries seeking to be self-reliant in defence.

'U.N. SANCTIONS ON NORTH KOREA NOT WORKING'

On the topic of North Korea, Lee said there was no sign of better ties, accusing the previous government of exacerbating tensions by directing the military to fly drones across the border.

Pyongyang has since late 2023 dropped unification with the South as a national goal and calls its neighbour its "primary foe."

But Lee said he has not given up on dialogue, adding that he was keen to halt Pyongyang's buildup of ballistic missiles and nuclear arsenal in the near term, which continues to grow despite international sanctions imposed since 2006.

"Sanctions are of absolutely no use right now," he said, adding that Russia has ceased to enforce the U.N. resolutions that it had voted to pass.

North Korea continues to produce materials enough for 10 to 20 nuclear weapons every year, he said.

North Korea's "door with Russia is definitely open," he added.

The two countries have dramatically improved political and military ties since Pyongyang began shipping weapons and troops in 2024 to help Moscow fight the war with Ukraine. In return, the North is believed to be getting help with food and advanced technology used in weapons development.

It is also unclear whether China is still committed to implementing the sanctions, Lee added. Chinese President Xi Jinping arrived in North Korea on Monday for his first visit in seven years as Beijing tries to draw its neighbour back into its orbit.

($1 = 1,536.5000 won)