[News Terms] AI, Semiconductors, and Both Koreas Engaged in a 'Chicken Game'

Originating from 1950s American youth games
Price-cutting competition to attract more customers
Appearing in various fields including politics and economy

Big tech companies aiming to dominate the generative artificial intelligence (AI) market have entered a 'chicken game.' They are willing to engage in price wars to get more customers to use AI chatbots.

Recently, more big tech firms have been lowering or eliminating fees for generative AI usage. OpenAI in the United States reduced the price of its latest large language model (LLM), GPT-4o (Po-o), from $7 to $4 per one million tokens (the smallest unit of a sentence).

Chinese companies are even more aggressive. ByteDance, famous for TikTok, launched Dubao Pro, promoting it as "99% cheaper than GPT-4." Tencent and Baidu have released lightweight AI models for free. The industry competition is shifting from performance to price.

[Photo by AI Image]

The chicken game is a model in economic game theory. Among two opposing players, if one gives up, the other benefits, but if neither gives up, the worst outcome occurs. The term originated from a 1950s American youth daredevil contest where two drivers would head straight toward each other’s cars.

The two drivers decide whether to keep driving straight or swerve just before a collision. The driver who swerves to avoid the crash is labeled a coward (chicken). If neither swerves, a head-on collision can cause serious injury or death.

In economics, the 'madman strategy' is used to make the opponent swerve. It involves declaring irrationality to the extent that one will not swerve even at the risk of death. For example, before the game starts, one might pull out the steering wheel or handcuff their hands behind their back in front of the opponent.

North Korea’s 'brinkmanship' is similar. Provocations such as nuclear tests or missile launches aim to change the situation or gain an advantageous position in negotiations. Former U.S. President Donald Trump’s extreme words and actions are also analyzed as part of this strategy. During his presidency, his bombshell remarks in South Korea-U.S. defense cost-sharing talks and FTA renegotiations are seen as sophisticated strategies for favorable negotiations. Despite appearances, it is regarded as a meticulous pragmatic strategy.

Chicken games between companies mainly manifest as price battles. The price competition in the semiconductor industry in the mid-2000s is well known. In 2007, the semiconductor industry entered an extreme price-cutting competition amid the global financial crisis. The price of the flagship product, 512MB DDR2 DRAM, dropped from $6.8 in 2006 to $0.5 in 2009.

As a result, German semiconductor company Qimonda and Japanese company Elpida could not withstand the competition and went bankrupt. On the other hand, Samsung Electronics, the winner of the competition, took the opportunity to become the world’s number one memory semiconductor company.

The free delivery service competition in the delivery platform industry is similar. Coupang decided to offer free delivery on Coupang Eats only to its paid membership 'Wow members' while raising the membership fee. Baedal Minjok, the industry leader, has been providing a budget delivery free service since April. Yogiyo lowered the monthly fee for its delivery subscription service 'YogipassX' from 99,000 won to 2,900 won. They have entered a chicken game to win over customers.