South Korea wants to be a top A.I. hub — its memory chip dominance could be an advantage

South Korea’s dominance within the reminiscence chip market and a sturdy synthetic intelligence ecosystem offers it a bonus within the world AI chip race, mentioned business observers.

“South Korea is very strong in memory chips. AI does require a lot of memory. South Korea dominating in the memory market is definitely an advantage,” mentioned James Lim, senior analysis analyst at Dalton Investments.

South Korea is aiming to turn out to be one of many world’s high three AI powerhouses by 2027, following carefully behind the U.S. and China, in accordance with the nation’s “digital strategy.”

The nation’s minister for science and knowledge and communications expertise, Jong-ho Lee, instructed CNBC the nation “aims to maintain its leading position in the memory semiconductor field.”

“South Korea seeks to emerge as a prominent player in rapidly growing and promising areas such as AI semiconductors,” mentioned Lee.

Large language fashions similar to ChatGPT — which brought about world AI adoption to blow up in latest months — are more and more in want of high-performance reminiscence chips. Such chips allow generative AI fashions to recollect particulars from previous conversations and person preferences in an effort to generate humanlike responses.

Generative AI is a kind of synthetic intelligence that may generate content material similar to textual content, photographs, code and extra.

“In order for the use of AI, including ultra-large language models, a significant number of semiconductor chips are required to operate, and global companies are competing fiercely to create high-performance and low-power AI semiconductors optimized for AI computation,” Lee mentioned.

South Korean corporations Samsung Electronics and SK Hynix are two of the world’s largest dynamic random-access reminiscence chipmakers and have been actively investing in AI analysis and growth to bolster their capabilities.

Samsung in March mentioned that it plans to speculate 300 trillion Korean gained ($228 billion) in a brand new semiconductor facility in South Korea.

Samsung is “spending and spending and spending,” Dylan Patel of analysis and consulting agency SemiAnalysis instructed CNBC final month. “And why is that? So they can catch up on technology, so they can continue to maintain their leadership position.”

Data from analysis agency TrendForce confirmed that Samsung held a market share of 40.7% and SK Hynix held 28.8% in the identical interval within the fourth quarter of 2022, adopted by Micron in third place at 26.4%. Memory chips are additionally utilized in computer systems, smartphones and tablets as storage units.

“South Korea has a robust local AI ecosystem, capable of competing with global tech giants,” mentioned Sung Nako, govt for giant scale AI growth at South Korean web large Naver.

ChatGPT maker OpenAI’s CEO Sam Altman had urged South Korea to guide AI chip manufacturing throughout his assembly with South Korean President Yoon Suk-yeol in June. Altman additionally expressed curiosity in investing in South Korean startups and partnering with main chipmakers like Samsung Electronics.

“U.S. chip giants Nvidia, Intel — they are not involved in the memory business. They don’t have any exposure in the memory space,” mentioned Dalton’s Lim, including that this is able to give South Korea a bonus.

Samsung is the provider of excessive bandwidth reminiscence chips to Nvidia, which match into the U.S. chipmaker’s newest A100 graphics processing models that prepare ChatGPT.

Geoffrey Cain, creator of the 2020 e-book “Samsung Rising,” instructed CNBC final month that he sees Samsung “diving deeper into the logic chip segment. So, [that’s] the AI chips, the future applications for semiconductor technology.”

The South Korean authorities is investing closely in AI.

In 2022, the MSIT mentioned it will likely be deploying 1.02 trillion gained ($786 million) of funding for AI semiconductor analysis and growth over the following 5 years.

“AI not only drives the growth of digital industries such as cloud computing and metaverse but also serves as a key factor in dramatically improving productivity in traditional industries such as manufacturing and logistics,” Lee instructed CNBC.

“With AI being applied across various domains, even greater economic ripple effects can now be anticipated,” he mentioned.

South Korea may even allocate 826.2 billion gained by means of 2030 to construct high-end chips by means of new knowledge facilities and dealing with startups.

In a press launch final month, the minister mentioned that “the economic and industrial value of AI semiconductor will continue to improve and Korea has the upper hand in the memory chip [sector] and foundry.”

“We will spare no effort to help Korea secure world-class AI semiconductor technology by leveraging our memory semiconductor capabilities to advance AI semiconductors in stages by 2030, developing additional to apply them to data centers, and fostering AI semiconductor experts,” he mentioned within the launch.

In a bid to problem to U.S. chip giants, South Korean AI chip design startup Rebellions claimed its new chip surpassed efficiency requirements, outperforming Nvidia’s equal GPUs by greater than 3 times.

“In terms of AI workload, we have much better energy efficiency, cost efficiency … sometimes better performance,” Rebellions co-founder and CEO Park Sung-hyun instructed CNBC in May.

Rebellions is reportedly racing to win authorities contracts as Seoul goals to bolster its native corporations.

“I see a lot of — thanks to OpenAI’s ChatGPT — founders starting companies in the region, and also a lot of investors, with the support from the government, showing a high interest in backing these startups,” mentioned JP Lee, CEO and managing companion at SoftBank Ventures Asia, on CNBC’s “Street Signs Asia.”

— CNBC’s Katie Tarasov contributed to this report.