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Korea Herald
20-07-2025
- Business
- Korea Herald
[Yoo Choon-sik] Factories of the future: Lee's vision beyond AI
South Korea has long prided itself on being one of the few nations capable of fully leveraging the potential of artificial intelligence innovation. This national confidence is rooted in the country's remarkable transformation from economic crisis to technological leadership ― a journey that began in earnest during the aftermath of the Asian financial crisis in the late 1990s. That legacy, however, now faces a new test. Recent independent studies have raised alarms that South Korea may be slipping behind in the global race to lead the AI revolution. One such report, published by the Australia-based technology firm Cloudscene, placed South Korea at 30th worldwide in terms of the number of AI-usable data centers. Shockingly, this ranking puts the country behind many others that it had once viewed as trailing in the domain of technological innovation. This surprising placement has prompted concern among policymakers and industry experts alike. Many attribute South Korea's lagging performance to policy missteps under the previous Yoon Suk Yeol administration, combined with a persistent failure to overhaul outdated administrative regulations. While the previous government emphasized more efficient use of research funds, it overlooked the importance of improving the business environment for tech infrastructure ― particularly the construction and operation of data centers by both domestic and international firms. As recently as early 2024, skepticism remained widespread ― even within government ranks ― about the notion that the global competition to develop stronger foundational AI models would continue to escalate. Many also questioned whether it was truly necessary for South Korea to dramatically scale up its computing power by securing more high-performance graphics processing units, especially given the massive costs involved. These doubts were swiftly proven wrong. As AI development intensified globally, the price of GPUs surged amid fierce competition among the world's tech giants. Companies like OpenAI, Google, Microsoft, Meta, Anthropic and Alibaba began pouring unprecedented investments into expanding their data center capacity and equipping them with the most advanced chips on the market. Despite this global momentum, debate persisted in South Korea. Some policymakers argued that the country could not feasibly compete with the world's largest tech conglomerates in developing foundational AI models. Instead, they suggested focusing on building secondary applications ― tools and services that piggyback on the capabilities of existing models ― once the foundational development race had settled. While this pragmatic approach had its merits, it overlooked a critical opportunity. Even if South Korea did not lead in model development, it could still serve as a vital AI hub by attracting global firms to build their data centers within its borders. The reality, however, is stark. Cloudscene's report found that Indonesia and Malaysia had 84 and 62 AI-ready data centers, respectively, compared to South Korea's 43. This disparity is especially troubling given South Korea's stronger standing in broader indices of technological and economic development. President Lee's ambitious AI policy Fortunately, a new sense of urgency has emerged under the leadership of President Lee Jae Myung. Unlike his predecessor, Lee has recognized the transformative power of AI and the importance of establishing a robust infrastructure to support it. At a groundbreaking ceremony for a new data center in Ulsan ― a joint venture between SK Group and Amazon Web Services ― Lee drew an evocative parallel between the digital infrastructure of the future and the Gyeongbu Expressway of the past. That expressway, constructed in the 1960s against widespread skepticism, played a critical role in catalyzing South Korea's industrial rise. Although he has not announced a specific target for the number of data centers to be built during his five-year term, Lee did pledge during his election campaign to procure 50,000 high-end GPUs. This would represent a massive leap forward, especially considering that only several thousand GPUs are believed to be currently in operation across the country. Equally significant is Lee's vision to decentralize this new digital infrastructure. Rather than concentrating all development in the capital region, his administration is seeking to distribute data centers across a wide range of provinces. This strategy not only addresses the current shortfall in AI computing capacity, but also tackles one of South Korea's most persistent social challenges: The overconcentration of population and economic activity in the Seoul metropolitan area. As of 2024, over 51 percent of the population lived in Seoul, Incheon and Gyeonggi Province ― an area that comprises just 12 percent of the nation's landmass. Modern data centers have evolved far beyond their original function as basic storage facilities. Today, they serve as industrial-scale computational hubs essential for training, fine-tuning, and deploying advanced AI models. Establishing such facilities outside the capital region could help balance national development by generating jobs both directly and indirectly related to the AI industry. According to the Korea Data Center Council, private-sector revenue from data centers is projected to grow by an average of 13 percent annually over the next four years ― even before accounting for the anticipated expansion under Lee's administration. However, these gains will only materialize if structural challenges are addressed. Chief among them is the country's aging and inefficient power grid system, which remains a bottleneck for large-scale AI infrastructure projects. In response, Lee has pledged to implement regulatory reforms and offer incentives to companies that locate new data centers near renewable energy sources in the provinces. Still, the key lies in translating these promises effectively into action. Reforming entrenched systems takes time, political capital, and cross-sector cooperation. Yet the urgency is undeniable. South Korea cannot afford to wait for the perfect moment. The global AI landscape is evolving rapidly. For South Korea, the stakes are more than economic. They touch on national identity and the country's ability to shape its future in an increasingly AI-driven world. Whether the country emerges as a leader or falls behind may depend on the decisions made in the next few years. The groundwork is being laid ― not just for faster computation, but for a new era of growth, equity and innovation.
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Korea Herald
23-06-2025
- Business
- Korea Herald
[Yoo Choon-sik] Power grid bottlenecks could stall Lee's AI ambitions
President Lee Jae Myung's trip to Ulsan late last week drew attention from around the world as an event that clearly demonstrated his government's pledge to place top policy priority on fostering the AI industry as a means to help South Korea overcome economic challenges and discover a new engine of growth. While attending a ceremony to mark the start of a massive project to establish a high-performance artificial intelligence data center in the southeastern industrial city of Ulsan, he expressed his appreciation to business executives for their hard work and promised his government's full support for more investment in the AI sector. His near-absolute control of both the administration and the legislature bodes well for President Lee's ability to implement his election pledges to narrow the country's seemingly widening gap not only with global leaders but also with its peers in AI. Lee's first two weeks in office were well received: stock prices soared, the currency strengthened and public approval ratings increased from the levels seen before the election, as investors hoped his control over both the administration and legislature would ensure swift implementation of his promises. These positive responses come even as he has yet to nominate his first cabinet members, who will be responsible for developing detailed policies. This process is expected to take some time, because his first prime minister nominee is himself awaiting confirmation hearings and parliamentary approval. However, Lee has announced several key appointments at the Office of the President, including veteran technocrat and former Vice Finance Minister Kim Yong-beom as his policy chief and influential AI expert Ha Jung-woo of Naver Corp. as his inaugural chief secretary for AI and future planning. These appointments reflect Lee's intention to break from the long-standing tradition of filling key presidential office positions based on personal or political considerations, especially given the fact that Kim has been working in the digital asset sector while Ha has led the tech giant's AI businesses. As one of the early adopters of AI innovation, South Korea once boasted that it was one of only a few countries having a well-established ecosystem of its own, ranging from high-end hardware manufacturers and software developers to homegrown network services and a population receptive to AI. However, several years of low-key policy stances under the previous government have left the country at risk of falling behind its rivals. South Korea ranked 30th in the number of data centers — a key measure of AI infrastructure — with only an estimated 43 centers, a fraction of those in the United States and fewer than a tenth of those even in Germany, Britain, or China, according to Australia-based Cloudscene. Lee has pledged to reverse this trend by channeling tens of billions of dollars in public and private investment into enhancing AI infrastructure, positioning it as the main driver of efforts to close the gap with global leaders and remain in the group of countries closely trailing the US and China. He reaffirmed his promise to provide full support for the AI industry during the ceremony held in Ulsan on Friday, which many high-profile business executives also attended — including leaders of the SK Group, Amazon Web Services, Kakao Corp., Samsung SDS Co., LG AI Research Institute, Lunit, FuriosaAI and Naver Cloud. Power grid problems Meanwhile, Lee also promised during the election campaign a sweeping transition in energy policy, aiming to drastically increase renewable energy generation. South Korea lags far behind major countries in renewable energy generation, which accounted for less than 10 percent of total output in 2023, compared to averages of over 30 percent for member states of the Organization for Economic Cooperation and Development. Even without factoring in the accelerating pace of AI innovation and the associated surge in power demand, Lee's ambitious energy plan appears easier said than done, given the South Korean economy's heavy reliance on the manufacturing sector, which requires affordable energy by nature. In 2023, electricity consumption by the industrial sector accounted for 51.4 percent — far higher than 21.1 percent in the US, 31 percent in Britain, or 43.4 percent in Germany, according to the Korea Chamber of Commerce and Industry, citing the latest data from the World Bank and the International Energy Agency. South Korea's latest energy generation targets, set by the previous administration, aim to increase carbon-free generation to 53 percent by 2030, up from an estimated 39.1 percent in 2023. The Lee administration is expected to raise this target further in line with its promises to significantly boost generation from renewable sources such as wind and solar. The real challenge for South Korea's government lies not in finding sites for massive wind or solar power plants — in fact, many provincial governments are eager to host such facilities on remote islands or depopulated land — but in expanding the power grid quickly and economically enough. Experts warn that building new power plants will be meaningless unless distribution networks are in place to connect them with consumers, such as semiconductor factories in the southern regions of Gyeonggi Province. South Korea has already experienced yearslong delays in laying power distribution networks due to conflicts with residents over property rights or health concerns. In one case, a 40-kilometer network took 150 months longer than planned, according to Korea Electric Power Corp. Experts have argued that the central government should take over the responsibility for constructing and managing power networks from KEPCO — the state-run utility — because conflicts with residents are intensifying, and KEPCO's financial condition has deteriorated due to repeated refusals by previous governments to raise electricity rates largely for political reasons. I understand that it is premature to judge whether President Lee is able to tackle these energy policy issues because he is still in his first month in office after being inaugurated without the usual transition period. I do believe, however, that it is far from certain that his AI-first policy could succeed without solving these issues.
