South Korea on Monday announced plans to invest about 7.8 trillion won ($6.48 billion) in research and development to foster the local production of materials and equipment over the next seven years and cut reliance on Japanese imports.
The move comes after Japan on Friday dropped Korea from its "white list" of countries with fast-track export status, intensifying a row over wartime forced laborers.
In July, Japan tightened controls on the export of materials used to make chips, South Korea's top export item, which threatened to disrupt global semiconductor supplies used by tech giants such as Apple and Huawei.
South Korea plans to raise "self-sufficiency" for the production of 100 key components, materials and equipment used to make chips, displays, batteries, automobiles and other products, with a goal to stabilize supply over the next five years.
The plan aims to "address structural weakness in South Korea's materials, parts and equipment sector, which heavily depends on a particular country," the government said in a statement.
In a 51-page statement, South Korea also laid out a number of measures to boost local supply, including financing support of over 2.5 trillion won for overseas acquisitions.