South Korea is putting $642.5 million (826.2 billion won) toward its effort to grow the AI chip industry. The government plans to spend the money through 2030 on advanced chips, data centers, startups and cloud service providers.
The investment comes as generative AI draws interest from consumers and organizations. Those services need substantial computing power, creating demand for chips and architectures designed to handle AI workloads. South Korea wants its companies to help meet that demand.
Domestic chips at the center of the first project
The government’s initial project is a pair of data centers known as neural process unit (NPU) farms. Seoul expects to begin hiring AI chipmakers and cloud companies as early as April, and the centers are projected to open as early as 2024. They will use domestic AI chips.
Three South Korean chipmakers—Rebellions, Sapeon Korea and FuriosaAI—plan to bid alongside cloud firms. Potential partners include Naver Cloud, KT Cloud, Kakao Cloud and NHN Cloud. The companies have not yet disclosed which chipmakers will team up with which cloud providers.
Each company enters the contest from a different position. Rebellions has backing from Korean telco KT and Temasek’s Pavilion Capital. Furiosa AI has received funding from Naver. Sapeon, a subsidiary of SK Telecom, has raised funding from SK Hynix, SK Telecom and SK Square.
Chipmakers are at different stages
Sapeon already offers its X220 AI chip to NHN Cloud. Manufactured by TSMC and launched in 2020, the chip is one example of a domestic product already being used by a cloud provider.
Rebellions and Furiosa AI have not yet moved into mass production. Both aim to commercialize their products next year, according to industry sources. Rebellions recently announced ATOM, an AI chip manufactured by Samsung for data centers, chatbot AI and computer vision.
Furiosa AI is set to unveil a second chip for chatbot AI applications and plans to commercialize it in the first quarter of next year. These plans show that the sector includes companies at different points in development, from a chip already offered to a cloud company to products still moving toward commercialization.
A wider technology strategy
The new funding forms part of South Korea’s digital strategy, unveiled in September 2022. That plan identifies six major technology areas: AI, AI semiconductors, 5G and 6G communication, quantum, metaverse and cybersecurity.
The earlier budget set aside approximately $795.3 million (1.02 trillion won) for AI semiconductors and $235.3 million (301.8 billion won) for next-generation AI from 2022 to 2026. Those figures and the newly announced investment cover different periods and projects, so they do not represent a simple like-for-like comparison.
South Korea is pursuing the strategy amid broader competition among countries seeking a stronger role in advanced technology. Japan, India and the U.S. are also exploring ways to compete in the advanced chip race. South Korea starts with an established electronics industry: it is home to major mobile brands and supplies components to many other companies.
Ambitions for a larger market share
Samsung and Naver, described as the country’s two largest tech firms, are partnering to develop AI chips. South Korea also aims to develop up to 50 types of AI chips focused on system semiconductors, with a goal of securing 20% of the global AI chip market by 2030.
The scale of that ambition reflects expectations for the market’s growth. A report by Allied Research projects the global AI chip market will reach $263.6 billion by 2031, up 37.1% from $11.2 billion in 2021. South Korea’s investment, data center plans and chip development efforts are intended to position its companies to compete for a share of that opportunity.