SEOUL – Around the world, governments are again using the tools of industrial policy — subsidies, tax incentives, public finance, trade measures and strategic regulation — to shape their economies. South Korea is no exception.

President Lee Jae Myung’s government has launched an ambitious strategy to promote semiconductors, AI infrastructure, robotics and other frontier industries, with the goal of bolstering future growth and competitiveness. But the path ahead is littered with obstacles.

The return of industrial policy is not simply a policy trend. Markets often underinvest in new technologies, because of coordination failures, learning externalities and economies of scale. But at a time when technological leadership and supply-chain resilience have moved to the center of national-security agendas, governments cannot afford to wait. They are now asking not whether they should pursue industrial policy, but what kind is right for them.

South Korea has been here before. In the 1970s — amid persistent threats from North Korea and rising security concerns stemming from the Nixon Doctrine and the partial withdrawal of U.S. troops from Korea — it launched the Heavy and Chemical Industry (HCI) drive, aimed at accelerating industrial upgrading and creating new comparative advantages.

Inspired partly by Japan’s successful industrialization, the HCI drive sought to transform the country’s industrial structure, promote exports and reduce its dependence on imported machinery and defense equipment. To this end, the government used targeted credit, tax incentives, foreign borrowing guarantees and industrial complexes to accelerate private investment in six strategic industries: steel, machinery, petrochemicals, shipbuilding, electronics and........

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