The South Korean government has clearly stated its intention to establish a leading position within the worldwide artificial intelligence sector, with a particular focus on the development of the semiconductors essential for AI functionality.

This week, the nation’s regulatory body for information and communications technology revealed plans to engineer as many as 50 distinct types of system semiconductors specifically designed for AI applications by the year 2030, as reported by Yonhap News Agency. The government will actively seek out thousands of skilled domestic professionals to spearhead this new period of technological advancement.

“South Korea’s economy is heavily dependent on semiconductor exports. We currently lack a major technology firm comparable to Google, Amazon, or Netflix. This is, I believe, the primary reason our government is prioritizing the development of AI chips. We must concentrate our efforts on areas where we possess a competitive advantage,” explained an engineer from Samsung Electronics, requesting anonymity.

South Korea has recently made numerous commitments to bolster emerging chip companies. For instance, earlier this year, the country announced a planned investment of approximately 1 trillion won (roughly $870 million) to support the commercialization and production of AI chips before 2029. Previously, President Moon Jae-in launched the “Presidential Initiative for AI” to increase public understanding of the industry.

These initiatives are occurring alongside increasing demand for chips related to AI, which McKinsey projects could represent nearly 20% of total semiconductor demand and generate around $67 billion in revenue by 2025.

The semiconductor industry is broadly categorized into two main segments: memory chips and non-memory (system) chips. South Korea is already a global leader in the production of memory chips, being the home of industry giants Samsung and SK hynix.

While this is a profitable sector, it primarily emphasizes “the manufacturing process rather than fundamental technologies,” according to Seewan Toong, an independent IT industry analyst. “The focus is on creating chips that are smaller, more dense, more efficient, and capable of holding greater memory capacity,” he added.

The nation aims to produce more advanced semiconductors and capture 20% of the global AI chip market by 2030, according to Yonhap News Agency.

Samsung has begun exploring next-generation chips, serving as the mass-production partner for Baidu’s AI chips in late 2022. In July, the company announced plans to recruit 1,000 new employees to focus on chip and AI development. SK hynix has also formed a strategic alliance, investing in Horizon Robotics, an AI chip designer valued at $3 billion.

“Samsung operates as an integrated device manufacturer, possessing a foundry that requires customers such as Nvidia, AMD, and Qualcomm. Competing directly with these customers presents a significant challenge. It will likely take considerable time to achieve a prominent position on the global stage,” the Samsung engineer stated.

“Furthermore, overcoming existing market dominance is a difficult undertaking,” he continued, referencing the strong position of American chip manufacturers. “As seen in the server CPU market, AMD required a lengthy period to gain market share from Intel, and a similar scenario is likely to unfold with AI chips.”

China, which has historically prioritized the application of AI over basic research, has also allocated substantial state funding to domestic semiconductor companies, particularly in light of U.S. sanctions on key technologies. The central question is how many of these startups, supported by government investment, will ultimately survive and compete with established American companies. Despite these challenges, governments worldwide recognize the strategic importance of AI.

“This is a very astute strategy by South Korea,” commented Albert Liu, CEO of Kneron, a well-funded edge AI startup backed by Alibaba, Horizons Ventures (Li Ka-shing’s investment firm), and Qualcomm.

“New companies have a substantial opportunity because the market itself is enormous, as virtually every device – from a Tesla to a toaster – will require an edge AI chip in the coming years. The convergence of 5G, AI, and IoT is maturing, and will enable a technology ecosystem that enhances our lives in a secure and private manner.”

This article was updated on October 13, 2020 to include expert perspectives.