South Korea’s supremacy in memory chips a benefit in A.I. race

South Korea’s supremacy in the memory chip market and a robust expert system environment provides it a benefit in the worldwide AI chip race, stated market 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,” stated James Lim, senior research study expert at Dalton Investments

South Korea is intending to turn into one of the world’s leading 3 AI powerhouses by 2027, following carefully behind the U.S. and China, according to the country’s “digital strategy.”

The nation’s minister for science and info and interactions innovation, Jong- ho Lee, informed 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,” stated Lee.

Large language designs such as ChatGPT — which triggered worldwide AI adoption to take off in current months– are progressively in requirement of high-performance memory chips. Such chips make it possible for generative AI designs to keep in mind information from previous discussions and user choices in order to produce humanlike reactions.

Generative AI is a kind of expert system that can produce material such as text, images, code and more.

“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 stated.

South Korean companies Samsung Electronics and SK Hynix are 2 of the world’s biggest vibrant random-access memory chipmakers and have actually been actively purchasing AI research study and advancement to strengthen their abilities.

Samsung in March stated that it prepares to invest 300 trillion Korean won ($228 billion) in a brand-new semiconductor center in South Korea.

Samsung is “spending and spending and spending,” Dylan Patel of research study and consulting company SemiAn alysis informed CNBC last month. “And why is that? So they can catch up on technology, so they can continue to maintain their leadership position.”

Data from research study company TrendForce revealed that Samsung held a market share of 40.7% and SK Hynix held 28.8% in the exact same duration in the 4th quarter of 2022, followed by Micron in 3rd location at 26.4%. Memory chips are likewise utilized in computer systems, mobile phones and tablets as storage gadgets.

“South Korea has a robust local AI ecosystem, capable of competing with global tech giants,” stated Sung Nako, executive for big scale AI advancement at South Korean web giant Naver.

ChatGPT maker OpenAI’s CEO Sam Altman had actually prompted South Korea to lead AI chip production throughout his conference with South Korean President Yoon Suk- yeol inJune Altman likewise revealed interest in purchasing South Korean start-ups and partnering with significant chipmakers like Samsung Electronics

” U.S. chip giants Nvidia, Intel— they are not associated with the memory service. They do not have any direct exposure in the memory area,” stated Dalton’s Lim, including that this would provide South Korea a benefit.

Samsung is the provider of high bandwidth memory chips to Nvidia, which suit the U.S. chipmaker’s most current A100 graphics processing systems that train ChatGPT.

Geoffrey Cain, author of the 2020 book “Samsung Rising,” informed CNBC last month that he sees Samsung “diving deeper into the reasoning chip sector. So, [that’s] the AI chips, the future applications for semiconductor innovation.”

The South Korean federal government is investing greatly in AI.

In 2022, the MSIT stated it will be releasing 1.02 trillion won ($786 million) of moneying for AI semiconductor research study and advancement over the next 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 informed CNBC.

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

South Korea will likewise assign 826.2 billion won through 2030 to construct high-end chips through brand-new information centers and dealing with start-ups.

In a news release last month, the minister stated that “the financial and commercial worth of AI semiconductor will continue to enhance 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 stated in the release.

In a quote to challenge to U.S. chip giants, South Korean AI chip style start-up Rebellions declared its brand-new chip exceeded efficiency requirements, outshining Nvidia’s comparable GPUs by more 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 informed CNBC in May.

Rebellions is supposedly racing to win federal government agreements as Seoul intends to strengthen its regional business.

“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,” stated JP Lee, CEO and handling partner at So ftBank Ventures Asia, on CNBC’s “Street Signs Asia.”

— CNBC’s Katie Tarasov added to this report.