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

South Korea’s dominance in the memory chip marketplace and a robust synthetic intelligence ecosystem offers it an edge in the world AI chip race, claimed sector observers.

“South Korea is quite powerful in memory chips. AI does require a large amount of memory. South Korea dominating in the memory sector is undoubtedly an benefit,” said James Lim, senior investigation analyst at Dalton Investments.

South Korea is aiming to turn out to be a single of the world’s best three AI powerhouses by 2027, pursuing closely powering the U.S. and China, according to the nation’s “digital tactic.”

The country’s minister for science and info and communications technology, Jong-ho Lee, told CNBC the place “aims to preserve its foremost posture in the memory semiconductor subject.”

“South Korea seeks to emerge as a distinguished participant in quickly developing and promising spots these as AI semiconductors,” stated Lee.

Large language models these types of as ChatGPT — which prompted international AI adoption to explode in the latest months — are ever more in want of large-performance memory chips. Such chips empower generative AI styles to try to remember facts from earlier conversations and user choices in order to deliver humanlike responses.

Generative AI is a type of synthetic intelligence that can make content material such as text, photographs, code and extra.

“In buy for the use of AI, like extremely-huge language products, a major number of semiconductor chips are needed to run, and world organizations are competing fiercely to make superior-effectiveness and very low-electricity AI semiconductors optimized for AI computation,” Lee mentioned.

South Korean corporations Samsung Electronics and SK Hynix are two of the world’s greatest dynamic random-accessibility memory chipmakers and have been actively investing in AI investigate and progress to bolster their capabilities.

Samsung in March said that it programs to commit 300 trillion Korean received ($228 billion) in a new semiconductor facility in South Korea.

Samsung is “investing and shelling out and expending,” Dylan Patel of analysis and consulting firm SemiAnalysis instructed CNBC final month. “And why is that? So they can catch up on know-how, so they can continue to maintain their management situation.”

Facts from research company TrendForce confirmed that Samsung held a market share of 40.7% and SK Hynix held 28.8% in the exact interval in the fourth quarter of 2022, followed by Micron in third area at 26.4%. Memory chips are also made use of in pcs, smartphones and tablets as storage gadgets.

“South Korea has a sturdy area AI ecosystem, capable of competing with worldwide tech giants,” mentioned Sung Nako, executive for large scale AI development at South Korean net giant Naver.

ChatGPT maker OpenAI’s CEO Sam Altman had urged South Korea to direct AI chip creation through his assembly with South Korean President Yoon Suk-yeol in June. Altman also expressed fascination in investing in South Korean startups and partnering with major chipmakers like Samsung Electronics.

“U.S. chip giants Nvidia, Intel — they are not included in the memory company. They really don’t have any exposure in the memory area,” stated Dalton’s Lim, incorporating that this would give South Korea an benefit.

Samsung is the provider of high bandwidth memory chips to Nvidia, which fit into the U.S. chipmaker’s hottest A100 graphics processing models that prepare ChatGPT.

Geoffrey Cain, author of the 2020 guide “Samsung Climbing,” explained to CNBC past thirty day period that he sees Samsung “diving deeper into the logic chip segment. So, [that’s] the AI chips, the foreseeable future purposes for semiconductor technology.”

The South Korean governing administration is investing closely in AI.

In 2022, the MSIT said it will be deploying 1.02 trillion gained ($786 million) of funding for AI semiconductor exploration and enhancement over the following 5 yrs.

“AI not only drives the expansion of digital industries these types of as cloud computing and metaverse but also serves as a important variable in substantially increasing efficiency in common industries these kinds of as manufacturing and logistics,” Lee informed CNBC.

“With AI remaining utilized across different domains, even larger economic ripple consequences can now be predicted,” he reported.

South Korea will also allocate 826.2 billion won by 2030 to develop significant-close chips by way of new facts centers and working with startups.

In a push release previous thirty day period, the minister mentioned that “the financial and industrial price of AI semiconductor will continue on to make improvements to and Korea has the upper hand in the memory chip [sector] and foundry.”

“We will spare no work to help Korea safe entire world-course AI semiconductor technological innovation by leveraging our memory semiconductor abilities to advance AI semiconductors in levels by 2030, creating supplemental to apply them to facts facilities, and fostering AI semiconductor specialists,” he said in the launch.

In a bid to challenge to U.S. chip giants, South Korean AI chip structure startup Rebellions claimed its new chip surpassed performance expectations, outperforming Nvidia’s equivalent GPUs by additional than three situations.

“In conditions of AI workload, we have a great deal better electrical power effectiveness, expense performance … from time to time far better efficiency,” Rebellions co-founder and CEO Park Sung-hyun informed CNBC in May.

Rebellions is reportedly racing to get governing administration contracts as Seoul aims to bolster its neighborhood businesses.

“I see a ton of — thanks to OpenAI’s ChatGPT — founders starting companies in the area, and also a large amount of buyers, with the assist from the authorities, displaying a higher interest in backing these startups,” explained JP Lee, CEO and managing partner at SoftBank Ventures Asia, on CNBC’s “Road Indications Asia.”

— CNBC’s Katie Tarasov contributed to this report.