Jong-ho Lee, South Korea's minister for science and information and communications technology, spoke to CNBC about the nation's hopes to become a notable participant in the burgeoning and optimistic AI semiconductor area. South Korea's control of the memory chip industry and its strong artificial intelligence ecosystem could give it an advantage in the international AI chip competition. Samsung Electronics and SK hynix, both Korean companies, possess almost 70% of the entire market in memory chips.
Industry observers point to South Korea's dominance in the memory chip market and robust artificial intelligence environment as advantages that will aid it in the global AI chip race. James Lim, Senior Research Analyst at Dalton Investments, commented that "South Korea is very strong in these memory chips — AI does require a lot of memory, so having South Korea dominating in the memory market is definitely an advantage." By 2027, the nation is seeking to be one of the world's top three AI powerhouses, next to the U.S. and China. Jong-ho Lee, the country’s Minister for Science and Information and Communications Technology, declared that South Korea is determined "to maintain its leading position in the memory semiconductor field" and "emerge as a prominent player" in industries such as AI semiconductors. AI applications like ChatGPT — that caused a boom in AI adoption — have a growing demand for high-performance memory chips, which enable generative AI models to store user preferences for humanlike responses.
Generative AI, a kind of artificial intelligence, has the capacity to develop substance such as text, pictures, code, etc. According to Lee, for the application of AI, including ultra-large language models, a sizable amount of semiconductor chips are needed to work. Global organizations are competing intensely to create high-efficiency and low-power AI chips optimized for AI computation.
South Korean companies Samsung Electronics and SK Hynix are counted among the biggest producers of dynamic random-access memory chips in the world. To improve their competence, they have been investing heavily in Artificial Intelligence (AI) R&D. In March of this year, Samsung declared that it would be injecting 300 trillion Korean won ($228 billion) into a new semiconductor plant in Korea. Dylan Patel of research and consultancy firm SemiAnalysis recently informed CNBC that Samsung is "expending a lot" of resources to "retain its leadership position" and to "bridge the gap in technology".
TrendForce data indicated that Samsung held 40.7% of the market share for memory chips in the fourth quarter of 2022, with SK Hynix at 28.8% and Micron at 26.4%. These chips are commonly found in computers, smartphones, and tablets as storage devices. Sam Altman, CEO of OpenAI, encouraged South Korea to lead the production of AI chips in his meeting with President Yoon Suk-yeol in June. He also expressed interest in investing in South Korean startups and partnering with major chipmakers such as Samsung Electronics. Executive Sung Nako of South Korean internet giant Naver commented that South Korea has a competitive AI ecosystem that rivals those of global tech giants.
Analysts have identified an opportunity of $12 billion to exploit the hype surrounding A.I., and they've named stocks they believe can capitalize on it. Money manager suggests that investors buy two specific chip companies instead of Nvidia, with one of them having potential to gain 30% in value. Finally, analysts are recommending either Apple's Vision Pro or Meta's Quest as the better option to benefit from the future of virtual reality technology.
Analysts have identified a potential for a $12 billion gain by investing in AI, and have named certain stocks to take advantage of it. Instead of buying Nvidia, a fund manager recommends adding two chip companies to portfolios, claiming one of them could yield a 30% return. When it comes to virtual reality technology, analysts like one company better than Apple Pro Vision or Meta Quest.
U.S. chip giants Nvidia and Intel are not part of the memory industry and therefore have no presence in the memory space, according to Dalton's Lim. This provides South Korea an advantage, due to Samsung supplying high bandwidth memory chips for Nvidia's A100 GPUs, which are used to train ChatGPT. Geoffrey Cain, author of the 2020 book "Samsung Rising," recently communicated to CNBC that Samsung will get even more involved in the logic chip sphere, focusing on AI chips and other applications for semiconductor technology.
The South Korean government is investing extensively in AI. In 2022, the MSIT declared it will be allocating 1.02 trillion won ($786 million) over the next five years for AI semiconductor research and development. Lee noted to CNBC that "AI not only drives the growth of digital industries such as cloud computing and metaverse but also serves as a key factor in improving productivity in traditional industries such as manufacturing and logistics." Lee further exclaimed that the application of AI across various domains can create an even greater economic impact. In addition, South Korea will be committing 826.2 billion won up until 2030 to construct high-end chips, data centers and collaborate with startups. In a press release last month, the minister articulated that "the economic and industrial value of AI semiconductor will continue to progress and Korea has an edge in the memory chip [sector] and foundry." He declared in the release that "we will spare no effort to help Korea secure world-class AI semiconductor technology by relying on our memory semiconductor capabilities to develop AI semiconductors in steps up to 2030, putting them to use in data centers, and fostering AI semiconductor experts."
In a move to take on U.S. chip makers, South Korean AI chip design startup Rebellions has declared that its new chip has surpassed performance standards and surpasses the performance of Nvidia's comparable GPUs by three times. Co-founder and CEO Park Sung-hyun detailed to CNBC in May, "In terms of AI workload, we have much better energy efficiency, cost efficiency ... sometimes better performance." As South Korea looks to support its local companies, Rebellions is attempting to secure government contracts. JP Lee, CEO and managing partner at SoftBank Ventures Asia, noted on CNBC's "Street Signs Asia", "OpenAI's ChatGPT has set off a wave of entrepreneurs in the area and investors, who are backed by government support, all showing great interest in investing in these new startups." Katie Tarasov of CNBC also contributed to this report.
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