[Market Pulse]The Path to Becoming an AI Powerhouse

AI Ecosystem Will Determine Growth Rate

At the beginning of every year, CES and the World Economic Forum in Davos, which show the flow of the global economy, wrap up amid great interest. Last year’s theme was “Let’s Dive into Artificial Intelligence (AI),” while this year’s theme was “The Innovators Have Arrived,” and the events successfully concluded last month.

More than 4,000 companies from around the world showcased how AI could transform existing business models, and global leaders, including Jensen Huang, Chief Executive Officer (CEO) of Nvidia, continued to deliver presentations. Innovative products were introduced not only in everyday home appliances but also in automobiles, medical devices, food, sports, cities, media, and digital assets, making the arrival of the AI era palpable. In the midst of this Warring States period of AI, I have been thinking about where the Korean economy should head.

First, new markets must be created. When the internet emerged in the early 1990s, the United States, led by Vice President Al Gore, launched the Information Superhighway project, and Korea pushed ahead with an ultra-high-speed network project that required an astronomical budget of 45 trillion won. In various fields such as schools, hospitals, agriculture, cities, national defense, and public administration, attempts were made to innovate existing service models and move them online, which created an enormous market and enabled us to become an IT powerhouse. A new playing field emerged where new powerhouses like global companies Google and Amazon, and domestic companies Naver and Kakao, could rise. We must create opportunities for the innovative technologies showcased at exhibitions like CES to be actually deployed and utilized in the market.

Last year, 25% of the 10 trillion won AI budget was allocated to the applied services sector, but private investment must also be boosted so that more diverse attempts can be made. The role of local governments, which are directly connected to the daily lives of ordinary citizens, is also important, and I hope that the local elections on June 3 this year will become a productive opportunity to further activate AI.

Second, the role of companies, especially startups, is crucial. Large corporations have the technological and financial capabilities to turn their core businesses into AX (AI Transformation), but startups inevitably face constraints in seizing opportunities, so we need to expand support systems that can reduce their risks. Venture funding programs such as TIPS are being expanded, but the mergers and acquisitions (M&A) market must become even more active. Even if innovative ideas fail to overcome critical hurdles and do not reach full commercialization, they should still be able to accelerate innovation by converging with existing markets. This is an area where improvements in the tax and financial systems are required.

Third, AI infrastructure must be upgraded. The supply of technological infrastructure such as graphics processing units (GPUs) needs to be expanded, and energy supply for AI data centers must also be improved. Although power plants have been completed in the East Coast region, the paradox of electricity not being supplied due to insufficient transmission and distribution facilities must be corrected as soon as possible. In particular, urgent measures are needed for network infrastructure. In Japan, SoftBank and Nvidia have joined forces to launch a project that will build specialized communications infrastructure capable of handling large-scale AI traffic for manufacturing companies and universities; we also need swift countermeasures. AI-focused university and graduate programs must be invigorated to secure talent, and curricula in the humanities and engineering must be improved and incentivized so that AI utilization can take place naturally.

Lastly, institutional innovation for AI is necessary. Methodologies for AI investment are important. Each ministry and local government must receive sufficient consulting support when undertaking AI projects. The same applies to companies. For example, the International Organization for Standardization (ISO) is proposing a new standard called “Innovation Management,” which is worth serious consideration. The General Assembly to be held in November will take place in Korea, and I believe it will be a good opportunity. New evaluation methods must be provided for investments and loans to AI companies. As we tackle these challenges one by one, the Korean economy will be able to achieve growth of more than 2% with AI as its wings and, like a Winter Olympics comeback, reverse last year’s situation in which we were overtaken by Japan.

Kang Sungjoo, Visiting Professor at Sejong University (Former Postmaster General of Korea Post)