SK Group, AWS to invest $5b in Korea's largest AI center: gov't

South Korea’s SK Group will invest around 7 trillion won (US$5.11 billion), including US$4 billion from Amazon Web Services, to build an AI data center in Ulsan.

The center, announced by the Science Ministry on June 20, will be the country’s largest.

Construction is set to begin in September, with the facility reaching full operational capacity of 100 megawatts by 2029.

SK Group Chairman Chey Tae-won plans to eventually expand the center’s capacity to one gigawatt, aiming to turn it into a global AI hub.

The announcement boosted AI-related stocks. SK Hynix rose over 3%, Kakao jumped 11%, and LG CNS gained 9%, pushing the KOSPI index above 3,000 points for the first time in three and a half years.

🔗 Source: Reuters

🧠 Food for thought

1️⃣ South Korea’s strategic push to decentralize its tech industry

The SK Group and AWS investment in Ulsan reflects South Korea’s broader strategy to distribute tech infrastructure beyond Seoul’s metropolitan area.

The Korean government has been actively promoting data center development in provincial regions to address urban infrastructure challenges and stimulate regional economic growth 1.

This approach mirrors President Yoon Suk-yeol’s “Data Valley” initiative in Gangwon Province, which similarly aims to decentralize digital infrastructure operations 1.

The decentralization strategy is particularly significant given the regulatory hurdles in securing power for new data centers in South Korea, where strict approval processes for power consumption have become a major challenge for operators 2.

By building in Ulsan rather than Seoul, the project not only alleviates pressure on the capital’s infrastructure but also creates a new technology hub in a traditionally industrial region, potentially transforming the local economy.

2️⃣ Positioning in the intensifying Indo-Pacific data center race

The SK-AWS partnership represents South Korea’s competitive response to the rapidly expanding Indo-Pacific data center market, which is growing at 12.6% annually and expected to reach $71.7 billion by 2032 1.

South Korea currently operates 43 data centers, significantly fewer than China’s 449, highlighting the substantial growth potential as the country’s market expands from $4.5 billion in 2023 to a projected $7.2 billion by 2029 1.